Author: Wintermute
Compiled by: Jiahua, ChainCatcher
In the past two weeks, the crypto market has moved out of a sideways trend, ETF fund flows have turned positive again, and new issuance of stablecoins has gradually stabilized. The most pressing question in the market now is: does this mean the next bull market has begun?
Looking back at the past, every acceleration in a bull market has a new liquidity channel behind it. From early token financing and stablecoins to ETFs and digital asset treasury companies (DAT), these new channels continuously attract incremental funds from outside into the crypto market, circulating between different assets, ultimately driving the revaluation of the entire market.
If a new bull market is brewing, this time, which channel will bring new incremental funds into the market? We believe that RWA is one of the most likely candidates.
Every bull market begins with new funds entering
Liquidity determines a bull market, and liquidity also requires an entrance. No matter how abundant global funds are, they will not automatically flow into the crypto market. Only when a sufficiently attractive new channel appears, bringing external funds into this asset class, can the crypto market truly benefit from the global liquidity expansion.
In the past, when channels such as stablecoins, ETFs, and DAT first emerged, they often brought sustained one-way fund inflows, driving market revaluation. Over time, they gradually transformed from incremental catalysts to everyday infrastructure, allowing funds to enter through these channels and just as easily exit.
Today, as the two latest channels from the previous cycle, ETFs and DAT have become normalized. The market is still waiting for a new funding channel to drive the next bull market.
In every bull market, a different funding channel experiences expansion, peaks, and ultimately normalizes, leading into a new cycle:
VC and early token financing (2017—2018): Venture capital and token sales brought the first batch of institution-sized funds into the crypto market.
Stablecoins (2020—2021): In one year, the net issuance exceeded 120 billion USD, establishing an on-chain dollar foundation, providing funding for DeFi and altcoin cycles.
ETF and DAT (2024—2025): ETF net inflows reached 63 billion USD, while digital asset treasury accumulatively increased holdings by over 115 billion USD, primarily driving the revaluation of mainstream crypto assets, with very limited spillover effects on other assets.
The dashed line in Chart 1 represents the fifth funding channel that is forming. Although the net increment of RWA is still relatively small compared to the peak values of previous channels, it is the only channel still growing as other channels begin to retreat. Next, we will explain why RWA may become the next funding entry capable of impacting the market cycle.
Old channels recede, new funds are still not in place
After entering a bear market, incremental funds typically gradually diminish with the decline of the dominant channels. As shown in Chart 2, every cycle has a channel that contributes the majority of the incremental funds, and the overall fund inflow scale peaks in tandem with this channel: reaching 12% of the total market cap in 2021, and 10% in 2025.
When the dominant channel shifts from an incremental catalyst to a regular infrastructure, the overall fund inflow rapidly approaches zero. At recent lows, the total fund inflow from various channels was only equivalent to 2.4% of the total market cap of the crypto market.
ETF funds temporarily turned into net outflows, while many DAT trading prices fell close to or below net asset value (NAV), making it difficult to rely on valuation premiums for financing and further increasing asset holdings. Meanwhile, the supply of stablecoins experienced its largest contraction since the Terra collapse.
In the past two weeks, these fund flows have recovered from the lows, but compared to peak values of previous cycles, their scale remains very limited.
This contraction is not unusual. In previous cycle resets, as old channels gradually faded, the next channel usually began to expand. However, this time, the scale of RWA is still insufficient to take over, falling about an order of magnitude short compared to the previous dominant channel. Whether it can grow to a sufficient scale will determine whether the next cycle can truly unfold.
RWA is not just about asset on-chain, but also about liquidity on-chain
The market generally understands RWA as "asset on-chain," but we believe it also means liquidity on-chain.
In the past year, the scale of on-chain tokenized assets has increased by about two times, reaching over 30 billion USD. Even during months of contraction in total supply of stablecoins, tokenized assets continued to grow. As funds can flow more freely between these two types of assets, the conversion threshold between tokenized assets and crypto-native assets is continuously lowering.
Now, tokenized stocks, tokenized funds, and crypto assets are increasingly stored in the same wallet, using the same stablecoins for transactions and settlements.
This more convenient asset conversion capability means that tokenization is no longer just a migration of traditional assets to on-chain but also makes it a potential liquidity channel. We believe it may become an important entry for delivering incremental funds in the next cycle.
Different ways of entry
The biggest difference between RWA and previous channels lies in the way funds enter the market.
Previous channels would bring buyers for a specific type of asset. VC and early token financing bought new tokens, stablecoin funds flowed into the DeFi and altcoin markets, while ETFs and DAT mainly purchased mainstream coins and blue-chip altcoins.
Tokenization, however, is different. These funds initially purchase stocks of Apple or U.S. Treasury funds, not crypto assets. But once funds enter the on-chain system, it becomes much easier to redirect them toward BTC or altcoins.
Past channels pushed funds directly to specific assets, while tokenization first brings incremental funds into the on-chain system, and then the funds decide where to invest.
Therefore, the short-term impact of RWA will not be as immediate as the inflows on the first day of an ETF launch. But over time, these institutional funds that have entered on-chain may gradually allocate across the entire crypto ecosystem. Meanwhile, as infrastructure connecting traditional assets and crypto protocols continues to mature, the costs of fund conversion and allocation will continue to decrease.
Why funds have not yet spilled over
In the past 12 months, RWA has attracted around 16 billion USD, about one-tenth of the best 12-month cumulative inflow of ETF and DAT in the last cycle. This channel is still in its early stages of expansion.
As shown in Chart 3, if we start counting from when each channel first reaches observable scale, their peak fund inflows typically occur 20 to 60 months after forming scale. ETFs peaked at month 20, stablecoins at month 33, and VC and early token financing at month 54.
Based on this time scale, the RWA channel currently has only 18 months of history, with the past 12 months of fund inflow being equivalent to 0.9% of the total market cap of the crypto market. This performance leads the DAT in the same period but slightly lags behind the ETF. It is still in the early stages and does not indicate that this channel has failed.
Currently, most tokenized assets are still cash management products, U.S. Treasuries, and money market funds, and are restricted within closed vehicles with thresholds for entry. The infrastructure connecting these assets to other on-chain markets has only recently started to operate.
The catalysts driving this change come from both regulation and market infrastructure:
Regulatory level: Market structure legislation and tokenization frameworks are expanding the qualified holders of tokenized securities and clarifying the rules for transferring these assets, pushing them out of closed permissioned funding pools.
Market infrastructure level: Tokenized U.S. Treasuries and funds are gradually being accepted as collateral by major trading platforms and DeFi protocols, transforming cash management assets that were originally parked on-chain into capital that can be called upon throughout the on-chain system.
Why this is important for position allocation
In 2024 to 2025, funds will mainly enter the market through various wrapped products, ETFs, and DAT, which primarily hold mainstream coins and blue-chip altcoins. Therefore, BTC, ETH, and a few altcoins will see revaluation.
Except for a small inflow during the Memecoin frenzy, the vast majority of altcoins have not received significant buying pressure; this portion of spillover funds mainly came from the wealth effect brought by the rise of BTC and SOL.
Investors waiting for a full altcoin season are essentially waiting for funds that are structurally unable to reach these assets. This bull market ultimately passed without generating widespread market enthusiasm. Those who understand the flow restrictions of ETF and DAT funds are also more likely to predict in advance which assets will gain buying pressure.
This time, two questions are crucial:
Where will RWA funds flow once they enter on-chain? Will they remain within the original vehicles, or will they flow into other on-chain markets?
If these funds begin to flow, where will value ultimately settle? Which assets will benefit from this? Which settlement networks, collateral platforms, and DeFi foundational protocols can capture this activity?
Understanding that tokenized assets are primarily held by institutions rather than short-term traders is very important. This means that if the next cycle is driven by RWA, the resulting market may not be overly frenzied but could last longer. At the very least, the structural support that RWA brings to the crypto market is more likely to manifest as moderate and persistent characteristics.
In the past two weeks, traditional channels, including new issuances of ETF and stablecoins, have seen a resurgence of fund inflows. This can drive market recovery, but to form a complete cycle, a new incremental funding channel may still be needed.
Every bull market in the past has accompanied the continuous expansion of a new channel. Currently, RWA seems to be the only candidate progressing along this path.
As the market enters a new cycle, we will closely observe whether the institutional assets that have been tokenized can emerge from closed vehicles, be used more as collateral, and enter DeFi, and whether they can generate fund flows that exceed cash management needs. Only when these changes actually occur can RWA validate its potential as the liquidity channel for the next bull market.
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