How fragmentation is quietly shaving billions from tokenized assets — and what investors should do about it

A hidden tax on tokenized assets that hits trading returns

A new study says fragmentation across blockchains and trading venues costs the tokenized-asset market up to $1.3 billion a year. In plain terms: when the same asset trades in different places and on different chains, prices don’t line up fast enough, liquidity is split, and investors lose money to wider spreads and slow trades. For asset managers building tokenized funds or trading tokenized securities, that isn’t a theoretical problem — it eats real returns and makes active trading more expensive.

The number looks big because it adds small, recurring frictions across many instruments. For example, modest price gaps that last minutes to hours, costs to move capital between chains, and the extra spread dealers demand to take on settlement or custody risk all compound. As tokenized securities and other on-chain assets scale, these micro-inefficiencies can sum to material, recurring losses for investors and strategies that rely on tight execution.

How the study turned on-chain mismatches into a $1.3B estimate

At its core, the report measures three moving parts: cross-chain price gaps, the cost and time to shift capital between networks, and how liquidity fragments across pools and venues. The team looked at same-asset prices on multiple chains and centralized venues, timed how long gaps persisted, and multiplied those gaps by typical trade sizes and turnover rates to get an annual cost figure.

Price gaps: The researchers identified moments when the same token quoted different prices on two chains or between an on-chain pool and a centralized venue. If an asset trades cheaper on Chain A and higher on Chain B, traders can profit — but only if they can move capital quickly and cheaply. The study measured the typical spread-size and how long those windows stayed open before arbitrage closed them.

Capital friction: Moving value between chains is rarely free. Bridges, wrapped tokens, or on/off ramps add fees, slippage, and time delays. The report translated those frictions into an effective cost per dollar moved. When that cost exceeds the price gap, arbitrageurs stay out and the gap persists, creating a net loss for passive holders through wider effective spreads.

Liquidity fragmentation: Liquidity that would normally concentrate on a few venues is spread thin across many pools and chains. The study modeled how thin depth increases the price impact of trades and raised effective spreads. Combining all three parts, the authors produced a central estimate near $1.3 billion and a sensitivity range that reflects different assumptions on trade frequency, bridge reliability, and the speed of arbitrage.

What this means for markets: price discovery, spreads and who benefits

First, expect slower price discovery. When the same asset trades in many corners of the market with limited flow between them, no single venue carries the full picture. That keeps accurate pricing from converging quickly and raises the chance of stale quotes affecting decisions.

Second, spreads widen. Dealers and liquidity providers charge more when they face custody, settlement, or cross-chain risk. For tokenized securities — which often require regulated custody and reconciliation to an off-chain register — those costs can be higher than for plain crypto tokens. That means investors in tokenized shares or bonds could routinely face larger transaction costs than comparable fiat or centralized-market trades.

Third, arbitrage and specialist traders win in the near term. Where gaps persist long enough to overcome bridge costs, nimble players who can move capital quickly will capture the rent. That’s good for market makers who can bridge or who maintain positions across chains, and bad for passive holders who simply accept the market spread.

Fourth, the infrastructure layer matters. Custodians, regulated brokerages and high-quality bridges that reduce settlement time and counterparty risk will gain premium business. Conversely, poorly designed bridges or lightly regulated venues that fail during stress will amplify losses and deter larger institutional flows.

What investors and allocators should monitor now

If you manage or invest in tokenized assets, treat fragmentation as an active risk factor. Here are clear, practical signals to watch and how they split into short‑ and long‑term responses.

Short term: monitor cross-chain price spreads and bridge liquidity. Regular, automated scans that flag persistent gaps are the early warning signs that arbitrage isn’t functioning. Keep an eye on on-chain slippage in the pools where your tokens trade: rising slippage means fewer safe execution venues. For trading strategies, consider using market makers or routing to venues where you know settlement is fast and liquidity is deep.

Medium to long term: watch custody and regulatory moves. Any rules that tighten custody requirements or create clearer on‑chain settlement standards will lower the risk premium and shrink spreads. Conversely, crackdowns that force assets off certain rails will increase friction. Also track institutional bridge providers and regulated tokenization platforms — firms that can offer faster settlement and legal certainty will compress the drag described in the report.

Finally, assess strategy fit. Passive, high-turnover or small-bid-size strategies suffer most from fragmented liquidity and wider spreads. If you’re building a tokenized product, bake in higher transaction budgets and consider charging explicitly for execution risk rather than pretending markets are perfectly efficient.

How the model was built, and where to be skeptical

The report combines public on-chain price data, bridge and pool metrics, and stylized assumptions about trade sizes and turnover. That mix is sensible, but it creates key sensitivities. A few assumptions — how often arbitrageurs can transact, the real costs of large bridge failures, or the speed of regulatory shifts — materially change the headline number.

Limitations to keep in mind: the study treats many assets as fungible across chains, which is often not true for tokenized securities tied to legal registries. It assumes reasonably functioning bridges and routing; a major bridge break or exchange outage would make the cost worse than modeled. And market structure is changing fast: new custody products, instant settlement rails, or coordinated market-making across chains could cut the drag quickly, making the upper end of the estimate pessimistic.

In short: the $1.3 billion figure is a useful red flag, not a fixed tax. It shows fragmentation is a real and measurable headwind. Investors should treat it as a structural cost to hedge, manage, and — where possible — exploit through better execution or selective partnerships with infrastructure providers.