The world of finance never rests - from the formation of currency to today's blockchain and cryptocurrency transactions, investors have constantly been on the lookout for new ways to grow their wealth.
As the digital asset industry matures, investors are increasingly looking for assets with real-world value rather than speculative tokens. This has given rise to a new class of digital assets called Real-World Asset (RWA) tokens, representing ownership in tangible assets (e.g. equity, real estate, commodities, or even traditional financial instruments) which have gained traction due to their ability to bridge the gap between the physical and digital economies.
This inevitably leads to one of the key strategic questions for investors: how long should they hold on to RWA tokens? In this post, we aim to address exactly that, and why holding RWA tokens for the long term could be a beneficial strategy for investors. Here are a few reasons why:
RWA tokens are linked to real-world assets, allowing value stability compared with purely speculative cryptocurrencies. As digital representations of actual assets, these assets are capable of maintaining (e.g. commodities) or increasing (e.g. real estate appreciation) in value over time based on their respective real-world applications and utility.
Investors holding RWA tokens over a longer period of time will accordingly enjoy the benefits from the stability or appreciation of these underlying assets. An example of this would be tokenized real estate projects - property values historically tend to rise over the long term due to various factors (e.g. inflation, increased demand, and limited supply in growing urban areas) which resulted in annualised returns of 7.94% over a 10-year (2013–2023) period for the APAC private properties asset class [1]. By holding the RWA tokens tied to real estate, investors could experience steady capital gains over time, in contrast to the volatility often seen in non-asset backed tokens.
Frequent trading or short-term holding of digital assets often incurs significant transaction costs, including gas fees, brokerage fees, and slippage, where the costs associated with buying and selling the assets can eat into potential profits if done too frequently. While frequent trading may still be possible, RWA assets are generally less volatile, with potential for growth over the medium-to-longer term compared to more speculative digital assets with no real-world grounding; this makes "buy and hold" strategies more viable.
Depending on geography, there also may be several benefits from a tax standpoint, with many developed nations offering a capital gains tax ("CGT") benefit to investments held for a period of at least 12 months. Examples of countries which this benefit applies to would be the United States of America, which favour long-term capital gains (on assets held for more than one year) which are taxed at lower rates (typically 0%, 15%, or 20% depending on the taxpayer’s income level) where comparative taxes could be as high as 37% for higher income brackets [2], or Australia, where CGT is reduced by 50% [3] if the asset was held for 12 months or longer.
RWA tokens are rapidly gaining traction, and liquidity of these markets is expected to continue to improve significantly - as more projects tokenize real-world assets and more regulatory frameworks are established, the infrastructure for trading RWA tokens will become more sophisticated. This includes the creation of secondary markets, decentralised finance (DeFi) lending platforms, and increased institutional adoption, all of which can enhance liquidity.
Digital asset exchange listings further play a role in liquidity by unlocking access to larger audiences. For tokens that intend to list on multiple exchanges, holding these tokens long-term will enable investors to be better positioned to capitalise on growing liquidity, which can make it easier to exit their positions when the time is right—potentially at a higher price.
Investing in RWA digital tokens combines the stability of physical assets with the innovation of blockchain technology. However, as with most investments, patience is crucial to unlocking the full potential of these tokens. Holding on to RWA tokens allows investors to benefit from the appreciation of the underlying assets, and capitalise on market growth and regulatory advancements. In a space that is still evolving, long-term thinking is the key to maximising returns and minimising risk.
By resisting the temptation of short-term gains and focusing on the bigger picture, investors position themselves to reap the rewards that RWA digital tokens can offer over the long haul.
