Arbitrage and Investment Opportunities in the Wave of Stock Tokenization

1. Introduction

Recently, stock tokenization has attracted widespread attention in the market, drawing strong interest from numerous investors. This article will systematically outline the implementation principles of stock tokenization, delve into current market arbitrage and investment opportunities, and detail different types of arbitrage logic, operational processes, and potential limitations, assisting professional investors in more efficiently identifying market opportunities. At the same time, we will also focus on the opportunities for individual investors in this trend, such as fragmented trading, diversified asset allocation, and other new paths. Although stock tokenization presents many opportunities, it still faces challenges in technical implementation, price anchoring, and other aspects, requiring investors to maintain rational judgment.

2. The Implementation Mechanism of Stock Tokenization

2.1 Definition

Stock tokenization refers to the process of converting traditional company stocks into tokens on the blockchain through smart contracts and custody mechanisms, allowing them to be held, traded, and combined on-chain. Essentially, these are derivatives of traditional stocks and do not represent direct ownership of the stocks; therefore, the value and risk of stock tokens are closely related to the underlying stocks.

2.2 Mainstream Implementation Paths

Currently, there are three mainstream structures for stock tokenization:

• Third-party Custody + Exchange Integration: Regulatory companies prove that the issuer indeed holds real company stocks, and only after dual verification by oracles can tokens be issued at a ratio of 1:1. Ultimately, the exchange is responsible for front-end display, user trading, and trade matching. The advantage of this structure is transparency, deeply anchoring its price through the staking of real stocks.

• **Licensed Brokers + Self-Operated Link: ** With specific licenses, a complete issuance, settlement, and self-custody cycle will be provided on the blockchain, ensuring maximum compliance, but also involving high technical and legal complexity.

• Contract for Difference (CFD) Structure: Users are trading not "mapped assets" but contract products linked to stock prices, which means users cannot obtain real shareholding rights or receive dividends. Such products are usually priced by the platform itself and carry the market-making responsibilities, lacking the support of underlying assets, thus do not grant shareholders any rights and are subject to strict regulatory constraints, facing significant decoupling risks.

3. Arbitrage Opportunities in Stock Tokenization

Currently, the main focus is on stock tokens issued by third-party custodians. These tokens' prices rely on the underlying real stocks, possessing strong anchoring properties, which reduces investment risks.

According to data from the platform, as of July 9, 2025, the total market value of stock tokens is $422 million, while the market value of just one stock, Nvidia, has reached $3.9 trillion. This shows that compared to the traditional stock market, the liquidity of stock tokens is severely lacking.

Insufficient liquidity combined with time differences in trading leads to a certain deviation between the prices of tokens and their corresponding stock prices on different platforms and time periods, and price deviations create opportunities for Arbitrage. This article focuses on the application of three classic Arbitrage strategies in stock tokens.

3.1 Spot Market and Token Market Hedging Arbitrage

• Arbitrage Principle

When the token exchange and the stock market open simultaneously, if the token price is significantly higher than the spot stock price, arbitrageurs can buy spot stocks (Long Spot) while shorting the corresponding stock tokens (Short Token) in the token market. If the price subsequently reverts, arbitrageurs can realize the price difference profit by selling the spot and buying back the tokens to close the position. The opposite is also true.

• Arbitrage operation process

For example, at a certain point in time on July 9, 2025: at this time, the price of Nvidia (NVDA) spot stock is $160.00; meanwhile, on a certain token trading platform, the stock token corresponding to NVDA, NVDAX, is quoted at $160.40.

A positive price difference of $0.40 has occurred between the two, meaning the Token price is higher than the spot price. Arbitrageurs can execute the following actions accordingly:

1. Buy NVDA spot stocks to lock in low-priced assets;

2. At the same time, short sell NVDAX stock tokens on the token trading platform to short overvalued assets at a high price;

3. Subsequently, continuously monitor the price trends and order book depth of the two markets;

4. When the prices of the two markets revert and approach $158.00:

   • The spot stocks bought before selling in the traditional market;
   • Open a market order in the token market to cover the short position, completing the hedge closing;

5. Each share completed a risk-free Arbitrage, with the profit coming from the initial price difference, resulting in a profit of $0.22 after deducting fees.

• Arbitrage conditions

Hedge arbitrage is highly sensitive to slippage and transaction fees, and requires rapid identification of buy and sell signals to execute operations. It is suitable for quantitative institutions with high-frequency trading capabilities to achieve lower transaction fees.

3.2 Arbitrage of the price difference of the same stock Token between different exchanges

• Arbitrage Principle

Cross-exchange arbitrage is one of the most classic types of crypto arbitrage. The principle is to buy tokens on a trading platform where the price is low and then transfer them to a platform where the price is high to sell. If the price difference between the different exchanges is large enough, allowing for a profit after deducting fees, the operation can be executed.

• Arbitrage operation process

Assuming the price of a certain Token at exchange A is 100 USDT, and the price at exchange B is 103 USDT.

Arbitrageurs can buy tokens at exchange A, then transfer them to exchange B and sell at a price of around 103 USDT to complete the arbitrage, still making a profit after deducting the buying fees, withdrawal fees, and selling fees.

• Arbitrage conditions

Arbitrage of this kind is limited by factors such as on-chain transfer speed, withdrawal restrictions, exchange deposit time, and trading pair depth. If on-chain transfers are involved, network congestion and delays must be considered. Arbitrageurs often need to use pre-stored liquidity, quantitative trading, and multi-account collaboration to achieve "risk-free arbitrage".

3.3 Arbitrage

• Arbitrage principle

Traditional stock settlement typically has a delay of T+2 or longer, while the trading and settlement of tokenized stocks is based on blockchain, theoretically achieving settlement in minutes or even seconds. Arbitrageurs can take advantage of the settlement time difference to arbitrage using the instant price adjustments in the token market before the traditional stock settlement is completed.

For example, the opening hours of traditional markets are from Monday to Friday, 09:30 to 16:00, while the cryptocurrency market operates 7 × 24 hours without interruption. This means that during non-trading hours, such as weekends and pre-market or after-hours, the prices of stock tokens may experience significant volatility driven by news events, while actual stock prices have yet to adjust, creating a brief arbitrage window. Pre-market information arbitrage is one of the main forms of time-difference arbitrage, for example, news such as earnings releases, geopolitical events, and favorable macro policy can cause tokens to rise or fall before the spot market.

• Arbitrage operation process

Arbitrageurs deploy monitoring systems or rely on news sources to capture significant news (such as NVIDIA releasing strong quarterly earnings, a central bank of a certain country raising interest rates, or the escalation of international geopolitical conflicts) during non-trading hours.

Analyze the directional impact and magnitude of the news on related stocks, which can usually be estimated through historical event backtracking. If the news is judged to be positive, immediately buy the related stock tokens on the token platform; if judged to be negative, short the related stock tokens.

Wait to close positions after the spot market opens: If the actual stock price moves in the direction of the arbitrage, then choose the right time to close positions after the spot market opens; or wait for the token price to return and close positions in the token market when it aligns with the spot price to capture the price difference.

• Arbitrage conditions

Arbitrage opportunities of this kind often last only a few minutes or even seconds, requiring a high-performance news push system and automated trading response. In addition, the accuracy of the news source is essential to avoid misjudgment of investment direction due to false news.

In addition, stock tokens can also be applied in some classic arbitrage strategies, such as triangular arbitrage and funding rate arbitrage.

4. Opportunities for Individual Investors

Arbitrage often requires investors to have very high demands on technology, capital, and the speed of information acquisition, making it more suitable for professional investors to operate. However, in the wave of stock tokenization, there are also some opportunities for individual investors.

4.1 Purchase fractional stocks

In traditional securities, some markets have a minimum purchase of 1 share, while others have a minimum of 100 shares. Investors looking to buy stocks of leading companies like Google, Amazon, and Tesla often have to pay a high price per share, which can be a significant burden, especially for novice investors. However, after stock tokenization, a single stock can be divided into smaller units, such as 0.1 shares or even 0.001 shares.

For example, the current price of NVIDIA stock NVDA is $162.88, and you must buy at least one share at a time. On some token trading platforms, you can purchase a minimum of 0.001 shares, which means you only need 0.16 USDT to hold NVIDIA stock tokens.

4.2 Multi-Asset Allocation

The全天候交易系统allows users to trade at any time without worrying about opening hours, enabling multi-asset allocation and the configuration of various assets to resist regional financial risks.

4.3 lower trading costs

In traditional stock market trading, intermediaries often charge various fees. However, trading tokenized stocks through decentralized exchanges (DEX) can significantly reduce trading costs, minimizing wear for investors. For example, stock brokerage trading fees range from 0.1% to 0.5%, while on certain cryptocurrency trading platforms, the fees are only 0.025% to 0.1%.

5. Risks and Challenges

Although stock tokenization arbitrage provides investors with unprecedented cross-market and high-efficiency trading opportunities, different arbitrage paths themselves also contain many risks.

The core basis of the above arbitrage is that the prices of different financial products for the same underlying asset will have a mean reversion tendency. If the price difference does not converge and instead continues to expand, investors will face losses. Therefore, investors need to manage their positions and control risks well. Additionally, there are common risks in arbitrage such as slippage risk, delay risk, and fees eroding profits.

Trading stock tokens also carries unique systemic risks:

• Oracle and Price Decoupling Risk: Most stock tokens rely on oracles or centralized matching systems to update prices. If a failure, delay, or attack occurs, it can cause severe fluctuations in token prices or permanent decoupling.

• Legal and Challenges: In most jurisdictions, stock tokens have not been clearly defined, and arbitrageurs may unknowingly encounter risks such as unregistered securities trading and cross-border flow of foreign assets.

6. Conclusion

Stock tokenization is not only a technology-driven practice of asset on-chain, but also a typical pathway for the crypto market to penetrate "real-world assets" (RWA). The emergence of this new type of asset offers opportunities for both professional investors and individual investors. Investors can choose different investment strategies based on their own characteristics. It is important to note that stock tokens also face systemic risks such as price decoupling and legal challenges, and investors need to closely monitor the security of the underlying assets.