How Blockchain Will Become a Driving Force on Wall Street
Whilst cryptocurrencies and NFTs have taken center stage in 2021 with Bitcoin (BTC) repeatedly breaking all-time highs and a non-fungible token taking $91.8 million in auction, blockchain technology continued to evolve away from the limelight. As we look to a new year on Wall Street, there are plenty of indicators that blockchain will finally begin to realize its potential in the coming months.
We can see evidence of major firms around the world preparing their business models to accommodate a future built on blockchain, and the liberating nature of the distributed digital ledger can bring to products and services. Most notably, payments provider Square (SQ) changed its name to Block in December, a nod to co-founder Jack Dorsey’s enthusiasm for blockchain.
As research shows, the blockchain market in the U.S. is set to grow exponentially over the course of the decade, with Grand View Research anticipating that the market will grow at a CAGR of 82.4% to 2028 from its 2020 value of $3.67 billion.
So, how does this impact Wall Street? When we think of blockchain, it’s easy to cast our minds to cryptocurrency and listings like Coinbase, but the technology is far more widespread and already being implemented effectively across a broad range of industries.
Perhaps most significantly, blockchains have emerged as an excellent form of funding for startups and small businesses, helping founders effectively crowdfund their startups and secure loans more efficiently. While this won’t impact Wall Street today, it could lead to a new wave of prosperous businesses launching IPOs over the coming months and years.
Attractive blockchain stocks for 2022
So, where can 2022’s most exciting blockchain stocks be found? Let’s take a deeper look into three companies that may experience strong growth over the next twelve months:
1. CME Group (CME)
CME Group is the world’s biggest futures and options exchange. The firm offers derivative securities for stocks, indexes and foreign exchanges among other financial instruments. Significantly, CME is also the only exchange that has created a market for Bitcoin futures contracts.
This makes the stock a big player when it comes to realizing the potential of blockchain. As blockchain’s use cases continue to grow and investors become more accepting of the emerging technology and the cryptocurrencies that are built on its framework, CME Group stands to directly benefit from the scaling of the industry.
Furthermore, we can see that the stock has performed exceptionally well since arriving on the Nasdaq. CME’s market capitalization now stands at an impressive $81 billion, with plenty of room for growth alongside the scaling of the cryptocurrency and blockchain market.
2. NVIDIA (NVDA)
Another stock that’s performed exceptionally well in 2021 is Nvidia. Although Nvidia is known as a designer and manufacturer of high-end graphics cards and processing chips, it may well also be the best placed company to help blockchain realize its potential in the mid-term future.
According to Vivek Arya, Bank of America analyst, Nvidia may be the only company today with the scale, hardware, software, developers and ecosystem to participate meaningfully in powering the hotly anticipated metaverse, which will be built on the foundation of blockchain-based components.
Much like companies like Meta (formerly Facebook), and Block, Nvidia has been prioritizing the future of technology and the metaverse itself. In late 2020, the company even launched its own Omniverse beta testing platform.
Furthermore, Nvidia also produces chips that are designed for cryptocurrency mining. This widespread accommodation of blockchain and crypto has seen NVDA grow at a rapid rate over the past five years, growing by 971% at the time of writing.
3. DocuSign (DOCU)
Although a relative newcomer to Wall Street, DocuSign is a clear market leader when it comes to e-signature technology. Significantly, electronic signatures are a key time and money-saving tool for businesses and individuals alike, with an estimated $36 reduction in the cost of doing business per transaction.
The company has been actively utilizing blockchain since 2015. Customers actively record their agreements on an Ethereum-based blockchain, and the company’s CEO, Dan Springer, has repeatedly emphasized the importance of blockchain in the future scaling of the business.
The company had expected Q3 2021 billings to range between $585 million and $597 million. Ultimately, the company reported just $565 million. This led to a massive dip in the value of the stock, but DocuSign’s status as a market leader and proactive adoption of blockchain are likely to see the company’s stock recover in 2022.
Fuelling the IPOs of tomorrow
The reason that blockchain is such a hot property on Wall Street is because the technology can do things that had been unimaginable until recently. For instance, smart contracts are self-executable, self-verifiable contracts that require no third parties, no middlemen and no transaction fees in theory.
So powerful are smart contracts that they could soon disrupt a range of industries, including finance, insurance and real estate among many more.
This could have significant ramifications for how small businesses and startups access their funding. For instance, crowdfunding platform Kickstarter has recently moved its platform to blockchain to further optimize its quality of service to users. There’s also the potential for smart contracts to automatically action equity or rewards-based crowdfunding programs for businesses.
Smart contracts created on blockchains can even pave the way for more freedom in the terms that VCs and founders agree to in return for funding. Payments can be pre-programmed to trigger based on the accomplishment of certain criteria like sales or revenue goals.
Better business funding will invariably lead to the scaling of the very best business ideas into endeavours that will grow into the position where they can go public faster and at a pace that suits their ambitions.
With this in mind, blockchain will comprehensively impact Wall Street in 2022 and beyond, with investors likely to begin reaping the benefits over the next twelve months.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.