Original author: @Moomsxxx
Original translation: Vernacular Blockchain
The RWA space is growing at an incredible pace. Just a few days ago, the total value of RWAs hit a new high, and today it broke this new record again.
1. RWA TVL
While many challenges related to privacy solutions, digital identity solutions, interoperability, etc. continue to cause operational friction and serve as bottlenecks to faster adoption, the $2-3 billion raised through on-chain funds and ~$200 billion in stablecoins demonstrate the growing interest and adoption in this area of the Web3 industry.
Current tokenized funds account for only a small portion of the growth in the fund industry that is expected to occur in the next few years.
Likewise, growth in the private credit space could also reflect market participants’ growing interest in opportunities beyond Bitcoin, DeFi-native yields, altcoins, and meme coins.
According to @Preqin, the global private credit market is worth nearly $1.7 trillion, while according to @RWA_xyz, tokenized private credit is worth only about $11.9 billion.
Active Loan Value - Private Credit Market (Source: RWA.xyz)
Analyzing this space in depth, I think it’s important to mention that the reliability of these loans has changed dramatically since the market crash in 2022, with teams at various platforms becoming more cautious and devoting more resources to ensuring higher quality credits issued.
From July 2021 to the end of 2022, lending was dominated by crypto exchanges and market making firms. As a result, lending in this space collapsed in the 2022 bear market.
Since then, growth has come primarily from real-world borrowing in the form of consumer asset-backed securities (such as auto loans, credit card debt, student loans, small business loans, etc.), real estate bridge loans, trade finance, and other less volatile asset classes.
Funding pool for various RWA transactions
Proof of this is the performance of resilient protocols like @maplefinance during the liquidation event on February 3, 2025 - the largest liquidation event in crypto history. More details can be found at the following link: https://x.com/maplefinance/status/1886332880411832514 In addition, the industry has matured considerably over the past three years, and technological solutions are emerging to address regulatory and privacy obligations, further improving this critical area.
2. Opportunity size
According to @BCG, tokenizing all mutual funds globally could unlock an additional $100 billion in annual returns for investors. Meanwhile, “sophisticated investors” (sorry, not you) make $400 billion by “capturing intraday value changes” (in layman’s terms, day trading). Based on historical ETF adoption patterns, it’s reasonable to expect that tokenized funds will account for 1% of global mutual fund and ETF assets under management within the next seven years.
Global ETF Asset Management (Source - JP Morgan Asset Management)
This means that by 2030, tokenized assets will exceed $600 billion.
Additionally, if regulators allowed existing mutual funds and ETFs to convert to tokenized funds (which would be simpler than launching a new tokenized fund), we could potentially see trillions of dollars in AUM.
Considering that similar growth expectations were made before the launch of the BTC ETF, I think we cannot rule out that these figures may be too conservative and the actual growth may be surprisingly high.
However, even based on these expectations, we are still talking about at least a 200-fold increase.
Again, at least 200 times more from now on.
Are you still sitting there feeling upset because you haven’t made any money yet?
Give me the benefits, please!
According to this @BCG study, our industrys investment demand for tokenized funds is approximately $290 billion. This figure includes demand from stablecoin holders, tokenized RWAs, and DeFi protocols.
I think this number may be too high because they take into account the growth of the DeFi protocol market value, which comes from a user group with a higher risk appetite, and the investment preferences of these groups may be different from those who are willing to invest in tokenized assets.
A more reasonable approach is to consider the growth of DeFi’s Total Value Locked (TVL) over the past two years, which is still a considerable number: $58.06 billion (source - @DefiLlama).
DeFi Total Value Locked (TVL)
Regardless, the value proposition of tokenized funds and RWAs is undeniable. They provide access to real-world investment opportunities and allow investors to better diversify their portfolios as market dynamics change.
Imagine if you could exchange your on-chain tokens for stocks, commodities and real estate through @Rabby_io in the past few months without having to withdraw cash, wouldn’t it be convenient?
But why does all this have to happen? What are the benefits for traditional finance? I haven’t seen much discussion on this topic on Crypto Twitter (CT) lately, especially with all the memecoin hype and strife. We always talk about how traditional finance (tradFi) is coming to the Web3 industry and adopting the technology we are building. But why would they do that? While I plan to write a whole article dedicated to this topic, here are some key points that explain why traditional finance needs and must adopt the crypto rails:
Instant settlement, as shown in the chart below, could add about $50 billion per year to investors’ portfolios.
Lower commissions will save another $33 billion, which will ultimately flow into investors portfolios.
Composable tokenized funds will be easier to lend.
Accessible trading tokenization will make it easier for investors to trade assets.
How tokenization can improve returns (Source: Boston Consulting Group)
3. Emotion comes second, momentum comes first
Traditional finance bids, while Crypto Twitter (CT) gets cut.
The chart above shows that regardless of the market, especially the sentiment on Crypto Twitter (CT) (laughs), traditional financial (tradFi) institutions are more interested in tokenization, crypto and blockchain than ever before.
It’s a reminder of how incredible the next few years are going to be.
Think about it: if traditional financial institutions were interested in tokenization and crypto in the past — even when there was little adoption, unfriendly regulation, and little innovation — why shouldn’t they become incredibly bullish now?
In fact, there is only one answer.
You know.
4. What do you think of the crypto market?
Even as sentiment among market participants was at an all-time low, with most discussions focused on @KaitoAI’s bullshit, Solana’s meme scams, and KOL drama, the charts were speaking loudly to another voice.
The data doesn’t lie. Since the launch of $TRUMP, RWA leading protocols have outperformed, or rather, proven themselves to be more resilient than the overall altcoin market.
If you included more of the leading RWA protocols in the index and looked back over a longer period, the results would be the same.
5. Conclusion
The RWA space is like a huge pie, and so far we have only cut a small piece. However, those who tokenize early will get a large share, while others can only pick up the remaining crumbs. Traditional finance knows this, which is why they are accelerating the process.
I’ll end with a quote from a @DigitalAssets report: “Looking back at the 2025 outlook, it’s clear that investors haven’t missed the boat on joining the digital asset wave. In fact, we believe we may be entering a new era of digital assets, one that is expected to span many years — even decades. This era could see digital assets permeate every sector — across industries, technologies, sectors, balance sheets, and even countries. The key question for investors now is not whether, but how actively they will participate in this transformation.”
