According to Woofun AI, against the backdrop of the crypto market breaking out of a sideways market, improving ETF capital flows, and gradually stabilizing the issuance of new stablecoins, with the normalization of ETF and DAT funds, RWA is becoming a key incremental channel for the next round of the bull market with the potential for institutional capital chain integration, which is expected to reshape the liquidity structure of the market.
Looking back at history, a new liquidity channel is at work behind the acceleration of every round of the bull market. From early VC and early token financing, to stablecoins, to today's ETFs and digital asset treasury companies (DAT), these new channels continue to attract incremental OTC capital into the crypto market and circulate between different assets, ultimately driving the entire market to be repriced. From 2017 to 2018, venture capital and token sales brought the first batch of institutional capital into the crypto market; from 2020 to 2021, the net issuance of stablecoins exceeded 120 billion US dollars in a year, establishing an on-chain dollar base to fund the DeFi and altcoin cycles; from 2024 to 2025, ETF net inflows were 63 billion US dollars, and the cumulative digital asset treasury increased by more than 115 billion US dollars, which mainly promoted the repricing of mainstream crypto assets, and the spillover effect on other assets was quite large Limited. The dotted line in Chart 1 represents the fifth funding channel being formed. Although the net increase in RWA is still small compared to the peaks of previous channels, it is the only channel that is still growing when all other channels begin to fall back.
The old channel is declining, and new funding is still not in place. After entering a bear market, incremental capital usually gradually dries up as the dominant channel declines. As shown in Chart 2, each cycle will have a channel that contributes most of the incremental capital, and the overall capital inflow will peak at the same time as this channel: reaching 12% of the total market value of the crypto market in 2021 and 10% in 2025. When the dominant channel changes from incremental catalysts to ordinary infrastructure, overall capital inflows quickly approach zero. At the recent low, total capital inflows from various channels were only 2.4% of the total market value of the crypto market. ETF funds once turned into a net outflow, and the transaction price of a large amount of DAT also fell close to net asset value (NAV), or even lower than net asset value, making it difficult to rely on valuation premium financing and continue to increase asset holdings.
Meanwhile, stablecoin supply experienced its biggest contraction since Terra's crash. These capital flows have recovered from their low point in the past two weeks, but the scale is still very limited compared to the peak of previous cycles. This contraction is not abnormal. Every time the cycle was reset in the past, the old channel gradually declined while the next channel usually began to expand. But this time around, RWA was still not large enough to take over, and was about an order of magnitude worse than the previous round of dominant channels.
The essence of RWA is not only on-chain assets, but also on-chain liquidity. The market usually understands RWA as “on-chain assets,” but we think it also means on-chain liquidity. According to data compiled by Woofun AI, the size of on-chain tokenized assets has almost tripled in the past year, reaching more than $30 billion. Tokenized assets continued to grow even in the months when the total stablecoin supply contracted. As funds can flow more freely between the two types of assets, the conversion threshold between tokenized assets and cryptographic native assets is constantly being lowered. Today, tokenized stocks, tokenized funds, and crypto assets are increasingly stored in the same wallet, and the same stablecoins are used to complete transactions and settlements.
This more convenient asset conversion capability makes tokenization not only a migration of traditional assets to the chain, but also makes it a potential liquidity channel, and may become an important entry point for the next cycle of incremental capital delivery.
The biggest difference between RWA and previous channels is how funds enter the market. Previously, each channel brought buyers for a specific type of asset: VC and early-stage token financing bought new tokens, stablecoin funds flocked to the DeFi and altcoin markets, while ETFs and DAT mainly bought mainstream coins and blue-chip altcoins. Tokenization is different; these funds initially bought Apple (AAPL.US) shares or US Treasury bonds funds rather than crypto assets. But once the funds are in the on-chain system, it will be much easier to switch back to BTC or altcoins. In the past, channels directly promoted capital to specific assets, while tokenization first brought incremental capital into the on-chain system, and then the funds decided to invest. As a result, the short-term impact of RWA will not be as immediate as the inflow of capital on the first day of the ETF's launch. However, over time, these institutional funds entering the chain may gradually be allocated to the entire crypto ecosystem.
At the same time, as the infrastructure connecting traditional assets and cryptographic protocols continues to mature, the cost of capital conversion and allocation will continue to decline.
Why haven't the funds spilled over yet? Over the past 12 months, RWA has attracted around $16 billion, which is roughly one-tenth of the combined inflows of ETFs and DAT in the previous cycle for the best 12 months. This channel is still in the early stages of expansion. As shown in Figure 3, when calculated from the time each channel first reached an observable scale, its peak capital inflow usually occurs 20 to 60 months after the scale was formed. ETFs peaked in month 20, stablecoins peaked in month 33, and VC and early-stage token financing peaked in month 54. On this time scale, the RWA channel is currently only 18 months old, and capital inflows over the past 12 months are equivalent to 0.9% of the total market capitalization of the crypto market.
This performance was ahead of DAT in the same period and only slightly behind ETFs. Just because it's still early days doesn't mean that this channel has failed. Currently, most tokenized assets are still cash management products, US Treasury bonds, and money market funds, and are restricted to closed carriers with entry barriers. The infrastructure connecting these assets to other on-chain marketplaces didn't really start operating until recently. The catalyst for this change comes from both regulation and market infrastructure: at the regulatory level, market structure legislation and tokenization frameworks are expanding the range of eligible holders of tokenized securities and clarifying transfer rules for these assets to push them out of closed licensed capital pools; at the market infrastructure level, tokenized US Treasury bonds and funds are gradually being accepted as collateral by major trading platforms and DeFi agreements, turning cash management assets that were originally parked on the chain into capital that can be mobilized throughout the chain system.
From 2024 to 2025, capital mainly entered the market through various encapsulated products, ETFs, and DAT, and these carriers mainly held mainstream coins and blue-chip altcoins. As a result, BTC, ETH, and a handful of altcoins received repricing. With the exception of a small amount of capital spillover during the Memecoin market, the vast majority of altcoins did not receive significant purchases; and this part of the spillover mainly comes from the wealth effect brought about by the rise in BTC and SOL. Investors waiting for a full copycat season are actually waiting for a sum of money that is structurally impossible to reach these assets.
This round of the bull market eventually passed, but it did not bring widespread market fervor. Investors who are more aware of ETF and DAT capital flow restrictions are also more likely to determine which assets can be bought in advance. This time around, two questions are critical: Where will RWA funds go once they enter the chain?
If these funds start to flow, where will the value end up settling down? It is important to understand that tokenized assets are mainly held by institutions and not by short-term traders. This means that if the next cycle is driven by RWA, then the market it brings may not be too fanatical, but it may last longer. At the very least, the structural support that RWA brings to the crypto market is likely to be mild and long-lasting. Over the past two weeks, traditional channels, including the issuance of new ETFs and stablecoins, have seen a resurgence of capital inflows. This can drive market recovery, but to form a complete cycle, a new incremental funding channel may be needed. In the past, every round of the bull market was accompanied by the continuous expansion of a new channel. At the moment, RWA appears to be the only candidate developing along this path. As the market enters a new cycle, we will be watching closely: whether institutional assets that are already on the chain can break out of closed carriers, be used more as collateral and enter DeFi, and whether they can generate capital flows that exceed cash management requirements. Only when these changes actually occur can RWA validate its potential as a liquidity channel for the next bull market.