Hedera's HBAR Doubles as Market Misinterprets BlackRock's Involvement in Tokenization, Then Falls 25%

The market gave back some of its earlier gains after realizing BlackRock wasn't directly involved in the tokenization on Hedera's blockchain.

AccessTimeIconApr 24, 2024 at 7:09 a.m. UTC
Updated Apr 25, 2024 at 7:51 p.m. UTC
  • Hedera's HBAR token surged Tuesday after investors jumped to the conclusion that announcements that BlackRock's U.S. Treasury money market fund had been tokenized on the Hedera blockchain meant that BlackRock was doing the tokenizing.
  • The token gave back some of its gains when investors realized BlackRock was not directly involved.
  • As the initial releases had stated, the tokenization was done by Archax, in collaboration with Hedera.

Sometimes the use of the passive voice is just clumsy writing, at others, it's not. But at all times it's a mistake to convert it into the active tense without confirmation. Today, that error cost some people a lot of money.

The HBAR Foundation, which supports the Hedera ecosystem, announced Tuesday that shares in BlackRock's ICS U.S. Treasury money market fund had been tokenized on the Hedera blockchain in collaboration with Archax. Hedera supporters on social media read that to mean that BlackRock chose Hedera to tokenize its fund, and sent the blockchain's native HBAR token up more than 107%.

But while shares in BlackRock fund had indeed been tokenized, it wasn't the world's largest asset manager that did the tokenizing. Once the market realized this, HBAR slipped 25%. To be clear, both the release from the HBAR Foundation and the one from Archax were transparent as to the structure of the arrangement, but as so often happens with crypto Twitter, people hear and read what they want to hear and read.

Archax CEO Graham Rodford said "it was indeed an Archax choice to put [the fund] on Hedera," in response to criticism about overstated claims by Hedera supporters.

HBAR price (CoinDesk data)
HBAR price (CoinDesk data)

BlackRock entered the real-world asset (RWA) tokenization sector last month when it launched its USD Institutional Digital Liquidity Fund on Ethereum.

The HBAR token is still up by 61% over the past 24 hours, but the 2% market depth remains relatively thin, with $900,000 in cumulative bids on the Binance and Upbit order books within 2% of the current price of 14 cents. The token has over $2.6 billion in trading volume over the past 24 hours, according to CoinMarketCap.

CoinGlass data shows funding rates across all derivative exchanges are heavily negative, which means those holding short positions have to pay those holding long positions, indicating a bearish bias. The ratio of longs and shorts on Binance is currently 0.85.

The weighted short interest, coupled with a lack of liquidity, creates a landscape for a volatile trading period that could culminate in a return to parity or a short squeeze, with open interest having risen by 442% to $160 million in the past 24 hours.

UPDATE (April 24, 2024, 15:05 UTC): Edits headline, subhead and first three paragraphs for clarity.

CORRECTION (April 24, 21:59 UTC): Corrects article throughout to say that the HBAR Foundation, not Hedera, announced the tokenization.

UPDATE (April 25, 2024, 20:50 UTC): Rewrites throughout for clarity.

Edited by Parikshit Mishra, Marc Hochstein and Kevin Reynolds.


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Oliver Knight

Oliver Knight is a CoinDesk reporter based between London and Lisbon. He does not own any crypto.