Arbitrage and Investment Opportunities in the Wave of Stock Tokenization

1. Introduction

Recently, stock tokenization has become a market hotspot, with an increasing number of investors showing strong interest in it. This article will systematically outline the principles of stock tokenization, delve into the arbitrage and investment opportunities currently present in the market, and provide detailed explanations of different types of arbitrage logic, operational processes, and potential limitations to help investors more efficiently identify market opportunities. At the same time, we will also focus on the opportunities for individual investors in this trend, such as fragmented trading and diversified asset allocation as new pathways. Although stock tokenization presents many opportunities, it still faces challenges in technical realization, price anchoring, and other aspects, and investors need to maintain rational judgment.

2. The Mechanism of Stock Tokenization Implementation

2.1 Definition

Stock tokenization refers to the process of converting traditional company stocks into tokens on the blockchain through smart contracts and custodial mechanisms, allowing for on-chain holding, trading, and combination. Its essence is that it is a derivative of traditional stocks and does not represent direct ownership of the stocks, hence the value and risk of stock tokens are closely related to the underlying stocks.

2.2 Mainstream Implementation Path

Currently, there are three mainstream structures for stock tokenization:

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

• Licensed Brokers + Self-operated Links: With specific licenses, providing a complete issuance, settlement, and self-custody cycle in the blockchain, ensuring maximum compliance, but also involving high technical and legal complexity.

• Contract for Difference (CFD) Structure: Users trade not "mapped assets" but contract products linked to stock prices, and users cannot obtain real equity rights or receive dividends. Such products are usually priced by the platform itself and bear market-making responsibilities, lacking support from 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, we mainly discuss stock tokens issued by third-party custodians. The price of these tokens is based on the underlying real stocks, which possess strong anchoring attributes, resulting in lower investment risks.

According to data from the platform, as of July 9, 2025, the total market capitalization of stock tokens is $422 million, while the market capitalization of just NVIDIA stock 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 during different time periods. Price deviations create opportunities for arbitrage. This article focuses on the application of three classic arbitrage strategies in stock tokens.

3.1 Hedging Arbitrage between the Spot Market and the Token Market

• 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 subsequent price 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 trading platform, the quoted price for the stock token corresponding to NVDA, NVDAX, is $160.40.

There is a positive price difference of $0.40 between the two, meaning the Token price is higher than the spot price. Arbitrageurs can execute the following operations based on this:

1. Buy NVDA spot stock 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:

   • Spot stocks bought before selling in the traditional market;
   • Open a market order in the token market to replenish the short position and complete the hedging closure;

5. Each share completes a risk-free arbitrage, with profits 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 for execution. It is suitable for quantitative institutions with high-frequency trading capabilities that can achieve lower transaction fees.

3.2 Arbitrage of the price difference of the same stock Token across 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, withdraw them to a trading platform where the price is high, and if the price difference between different exchanges is large enough to still yield a profit after deducting fees, the operation can be executed.

• Arbitrage operation process

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

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

• Arbitrage conditions

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

3.3 Time Difference Arbitrage

• Arbitrage Principle

Traditional stock settlements usually have a delay of T+2 or longer, while the trading and settlement of tokenized stocks are based on blockchain, theoretically achieving settlement in minutes or even seconds. Arbitrageurs can take advantage of the settlement time difference to arbitrage by adjusting to the instant prices 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 - 16:00, while the crypto market operates 7 × 24 hours without interruption. This means that during off-market hours, such as weekends and pre-market or after-market, the prices of stock Tokens may experience significant fluctuations driven by news events, while the actual stock prices have not yet adjusted, providing a brief arbitrage window. Pre-market information arbitrage is one of the main forms of time difference arbitrage, for instance, news such as earnings releases, geopolitical events, and favorable macro policies causing Tokens to rise or fall ahead of 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 country's central bank raising interest rates, or escalating international geopolitical conflicts) during non-trading hours.

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

Wait to close positions after the spot market opens: If the actual stock price moves in the direction of arbitrage, then close the position at an opportune time after the spot market opens; or wait for the token price to return to align with the spot price and close the position in the token market to capture the price difference.

• Arbitrage conditions

Arbitrage opportunities of this kind often last only a few minutes or even tens of seconds, requiring a high-performance news push system (such as professional financial information platforms, social media, news subscription services) and automated trading responses. In addition, the accuracy of the news source is essential to avoid misjudging the 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, funding, and the speed of information acquisition, making it more suitable for professional investors. However, there are also opportunities for individual investors in the wave of stock tokenization.

4.1 Buy Fractional Stocks

In traditional securities, some markets have a minimum purchase of 1 share, while others have a minimum purchase of 100 shares. Investors who want 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 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 a minimum of one share must be purchased at a time. However, on a certain trading platform, a minimum of 0.001 shares can be purchased, which means you can hold Nvidia stock Token for only 0.16 USDT.

4.2 Multi-Asset Allocation

The全天候的交易系统 allows users to trade at any time without worrying about opening hours, enabling them to diversify their asset allocation and 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 exchange platforms (DEX) can significantly reduce transaction costs, saving investors from slippage. For example, the trading fee for stock brokers is 0.1% - 0.5%, while on certain trading platforms, the fee is only 0.025% - 0.1%.

5. Risks and Challenges

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

The core basis of the above arbitrage is that different financial products of the same underlying asset tend to revert to a mean price. If the price difference does not converge and continues to expand, investors will face losses. Therefore, investors need to manage their positions and control risks. In addition, there are common risks in arbitrage such as slippage risk, delay risk, and transaction fees that erode profits.

Trading stock tokens also carries unique systemic risks:

• Oracles and Price De-Pegging Risks: Most stock tokens rely on oracles or centralized matching systems to update prices. If there are failures, delays, or attacks (such as the oracle failures experienced in the history of certain chains), it can lead to severe price fluctuations or permanent de-pegging of the tokens.

• 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 asset on-chain practice but also a typical path for the crypto market to penetrate into "real-world assets" (RWA). The emergence of this new type of asset provides opportunities for both professional and individual investors. Investors can choose different investment strategies based on their 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.