US Treasury high yield vs physical assets on-chain RWA becomes a new bridge between traditional and crypto market

Recently, the yield on the 10-year U.S. Treasury bond has exceeded the 4% mark for three consecutive days. The high yield makes fixed income investments in traditional markets more attractive. This could lead to some institutional funds in the crypto market flowing into traditional markets in search of more stable returns.

At the same time, the development of physical assets ( RWA ) track has the opportunity to attract incremental users from traditional markets and enhance overall liquidity. By putting traditional assets on-chain and tokenizing them, RWA can provide traditional market participants with a more convenient way to invest and open up channels for their participation in the crypto market. This bidirectional liquidity can increase the overall liquidity of the market and promote more effective capital allocation.

The introduction of RWA tokens has created 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 enter traditional markets via RWA tokens. This cross-market liquidity increase helps improve market efficiency and attracts more investors and traders.

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

Investors typically seek to reduce risk through diversification and asset variety. RWA tokens provide a way to combine traditional assets with the crypto market, allowing investors to access investment opportunities in various assets through a single platform. This demand for asset diversification may drive investor interest in RWA and incorporate it as part of their portfolio.

In terms of lending agreements, there are three main platforms worth paying attention to:

Maple was founded in 2019 and is led by traditional financial bankers and credit investment professionals. It aims to improve traditional capital markets by providing infrastructure for credit experts to operate on-chain lending businesses and connecting institutional lenders with 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 in USDC and wETH, and this April, the platform announced plans to launch an on-chain lending pool for investing in U.S. Treasury bonds.

TrueFi is developed and managed by the TrustToken team, emphasizing transparency and creditworthiness by introducing decentralized autonomous organizations to manage decisions such as loan approvals and risk assessments. 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 that introduces an unsecured lending protocol 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. As of now, the total amount lent from Clearpool's permissionless pools has reached $328 million, with an average yield of 10.24%.

In addition to the native lending protocols of the crypto market, we can also expand new narratives and related products from the perspective of traditional financial markets. Structured deposit products are a common investment tool in traditional financial markets, typically offered by banks or financial institutions. This type of product combines financial instruments such as fixed income and derivatives to provide a certain return while controlling risk to some extent. The "dual currency wealth management" in the crypto market is a form of structured deposits.

Structured deposits have two major elements: 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 volatility.

The crypto market is often characterized by high volatility and risk. Structured deposit products may offer some mechanisms for hedging risks, such as derivative contracts. These products can be used to reduce the risk exposure of cryptocurrency institutions during market fluctuations and provide more stable returns. Therefore, with the assistance of RWA, some professional investors or institutions may tend to choose structured deposits, which are more mature products in traditional financial markets.

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