RWA popularity is on the rise as encryption and TradFi market integration accelerates.

Recently, the yield on the US 10-year Treasury bonds has continuously surpassed the 4% mark, making fixed income investments in traditional markets more attractive. This may lead some institutional funds in the crypto market to shift towards traditional markets in search of more stable returns.

At the same time, the development of the Real World Asset (RWA) sector has created opportunities to attract incremental users from traditional markets and enhance liquidity. By tokenizing and putting traditional assets on the blockchain, RWAs can provide traditional market participants with a more convenient way to invest, while also opening up channels for them to enter the crypto market. This two-way liquidity helps to increase the overall liquidity of the market and promote a more effective allocation of capital.

The introduction of RWA tokens has built more liquidity bridges between traditional markets and the crypto market. Traditional market participants can engage in the crypto market through RWA tokens, while crypto market participants can also enter traditional markets via RWA tokens. This increase in cross-market liquidity is beneficial for improving market efficiency and attracting more investors and traders.

In terms of infrastructure, decentralized finance (DeFi) is built on blockchain technology, providing a range of financial services such as lending, trading, and liquidity mining. RWA tokens, as representatives of traditional assets in DeFi, offer DeFi users a wider variety of asset choices and can seamlessly integrate with the DeFi ecosystem. This demonstrates the immense potential of RWA in the DeFi field, attracting more attention.

Investors often want to reduce risk by diversifying their investments and diversifying their assets. The RWA token provides a way to combine traditional assets with the crypto market, enabling investors to access investment opportunities in multiple assets through a single platform. This need for asset diversification may prompt investors to take an interest in RWA as part of their portfolio.

In the lending protocol space, there are three main participants worth noting:

Maple was founded in 2019, led by traditional finance bankers and credit investment professionals. It aims to improve traditional capital markets by providing the infrastructure for credit experts to operate on-chain lending businesses and connect institutional lenders and borrowers. Maple combines industry compliance standards and due diligence with transparent, frictionless lending enabled by smart contracts and blockchain technology. Its on-chain business primarily offers lending of USDC and wETH, and announced plans in April this year to launch an on-chain lending pool for investing in U.S. Treasuries.

TrueFi is developed and managed by the TrustToken team, emphasizing transparency and creditworthiness, and manages loan approvals and risk assessments through the introduction of decentralized autonomous organizations. Since its official launch in November 2020, TrueFi has issued over $1.7 billion in loans to more than 30 borrowers, primarily including fintech companies, credit funds, and crypto market institutions.

Clearpool is a decentralized financial ecosystem focused on introducing unsecured loan lending protocols for qualified institutions. Institutions can raise short-term funds through a single borrower pool, while DeFi lenders can obtain low-risk returns based on market-derived interest rates. To date, Clearpool's permissionless pool lending total has reached $328 million, with an average yield of 10.24%.

In addition to these native lending protocols in the crypto market, we can also expand new narratives and related products from the perspective of traditional financial markets. Structured deposit products are an example; they are a common investment tool in the traditional financial market, usually offered by banks or financial institutions. This product combines fixed income and derivatives among other financial instruments to provide a certain return while controlling risk to some extent.

The two main elements of structured deposit products are the underlying reference and the product structure. The underlying reference can be exchange rates, interest rates, indices, ETFs, stocks, funds, commodities, etc. Different product structures are suitable for different market conditions, such as rising, falling, or range-bound fluctuations.

In the crypto market, structured deposit products may provide some mechanisms for hedging risks, such as derivative contracts. These products can be used to reduce the risk exposure of cryptocurrency institutions during market volatility and offer more stable returns. Therefore, with the support of RWA, some professional investors or institutions may prefer to choose such products that are more mature in traditional financial markets.

Overall, the rise in the popularity of RWA represents a trend of integration between the crypto market and traditional financial markets. This integration not only provides investors with more investment options and a more diversified asset portfolio but also brings higher liquidity and efficiency to the entire market.