RWA Investment Guide: Choose projects that are good at marketing and wait for the opportunity to pull back

Original author: The DeFi Investor

Original compilation: Deep Chao TechFlow

The Real World Assets (RWA) sector is one of the sectors with the highest long-term potential. This is clearly not just a short-term narrative.

Tokenizing real-world assets brings many benefits:

• Easier access

• transparency audit

• Near instant settlement speed

• Composability (imagine opening up loans on your tokenized car on a decentralized money market like AAVE)

I believe cryptocurrencies will play a significant role in the RWA/tokenization industry.

In this question, I will discuss my reasons for being bullish on RWA, some of the RWA projects on my watch list, and my strategy for choosing the right coin in this space.

Why I’m Bullish on the RWA Narrative

Real-world assets in cryptocurrencies refer to tangible assets that are tokenized and put on the blockchain.

According to Crypto KoryoDashboard, real-world asset narratives were the second-best performing narrative this year, beating out artificial intelligence.

But despite this, the total market capitalization of real-world assets in the cryptocurrency industry remains small: just over $9 billion, according to Coingecko.

For context, The Boston Consulting Group predicts that tokenization of illiquid assets will reach $16 trillion by 2030. While this prediction may be overly optimistic, it is clear that tokenization has huge growth potential.

Stablecoins are a great example of real-world assets that have been tokenized and have found product market fit, with their market cap currently exceeding $150 billion.

Recent news from BlackRock has added fuel to the fire.

As you may have heard, BlackRock, the world’s largest asset manager, announced a few days ago the launch of a tokenized fund on Ethereum worth over $100 million.

Although this news is not directly related to any cryptocurrency RWA project, speculation about it led to a significant increase in the price of the RWA token.

Beyond that, theres one main reason why this news is so important:

BlackRock’s launch of an on-chain tokenized fund legitimizes the on-chain real-world asset industry and paves the way for similar initiatives by other institutions.

After BlackRock applied for a Bitcoin spot ETF last year, Fidelity and other financial giants also subsequently applied. I think it will be the same this time.

Additionally, RWA/tokenization is an easy-to-understand narrative for retail investors. To beat the market, you have to invest in tokens that retail investors are willing to buy once they start paying attention to cryptocurrencies.

Because of all the things I mentioned above, I expect real world assets to be one of the best performing narratives in this bull market.

RWA market situation

As shown in the image above, this industry has many subcategories, some of the most important include:

• Tokenizing Treasuries and Securities

• On-chain private credit

• Infrastructure projects (e.g. RWA blockchain)

• real estate

• Regenerative Finance

There are dozens of interesting RWA projects and it is impossible to cover them all. But I will focus on some market leaders and some standout projects:

Mantra

Mantrais the first blockchain designed specifically for real-world assets.

Just days ago, the team announced $11 million in funding.

Some of the core features of this blockchain include:

• MANTRA Compliance Module: A set of tools that help Web3 platforms comply with regulatory requirements, including KYC protocols and sanctions screening

• MANTRA Token Service Module: an SDK that enables enterprises to easily create, issue, distribute and manage digital assets that comply with various regulatory frameworks

• Mantra DEX: A DeFi hub that makes trading real-world assets simpler and more efficient using the Cosmos ecosystem

All in all, the project aims to make it easier for businesses and investors to launch and trade tokenized assets on-chain.

Complying with regulatory requirements has always been a big issue for Web3 enterprises, and Mantra provides several tools to make this process easier.

Ondo Finance

OndoProvides liquidity exposure to institutional-grade financial products such as short-term U.S. Treasuries and ETFs.

The protocol has a TVL of $220 million and is backed by Pantera Capital and Coinbase.

As I said before, with Ondo you can invest in tokenized U.S. Treasuries.

Interestingly, after you do this, you can use something likeFlux FinanceSuch a protocol targets these tokenized Treasury lending assets in DeFi.

Composability is a key feature of DeFi as it enables developers to combine multiple DeFi products into entirely new products, just like Flux does.

It will be interesting to see more RWA projects leverage the composability of DeFi to enable new use cases.

Avalanche

AlthoughAvalancheIt is primarily known for being an L1 platform for various dApps, but its team is also putting a lot of effort into tokenization and institutional adoption.

For example, last years Avalanche:

• Introduced a $50 million ecosystem fund to pioneer tokenization

• Announces partnerships with financial giants including WisdomTree and JPMorgan Chase

• Launched Evergreen subnet tailored for institutions

Recently, Citibank also announced that it has successfully used the Avalanche subnet to explore the tokenization of private equity funds.

In another interesting development, Securitize, a well-known asset tokenization company, chose to issue its first tokenized asset on Avalanche last year.

Parcl

ParclIt is the first derivative DEX in the real estate market.

The project is backed by Coinbase Ventures, Solana Ventures, and Dragonfly. The launch of its token has been confirmed to take place in the coming weeks.

Parcl is one of the largest dApps on Solana, with a TVL of almost $200 million.

With Parcl, you can easily speculate on real estate market price fluctuations as the platform offers city indices.

Clearpool

ClearpoolIt is a decentralized credit market.

Through it, you can lend USDC to institutional borrowers in exchange for up to 23% APY.

All borrowers sign a legal agreement before funds are received, ensuring rights of recourse against the borrower in the event of default.

Interestingly, Clearpools TVL has increased by almost 50% over the past few weeks.

LandX

LandXHas a unique offering as it is the first decentralized RWA platform for investing and trading farmland and agricultural products.

The agreement provides real-world farmers with capital in exchange for a legal share of their crops. Since LandX farmers’ crop shares are tokenized, you can easily invest using the platform and earn inflation-proof returns.

Thanks to LandX, commodity inventory can be made available as a liquid digital asset.

Other items worth mentioning:

Florence Finance: Leading Euro-denominated RWA project connecting DeFi with physical lending

MakerDAO: While MakerDAO is technically more than just an RWA project, its stablecoin $DAI is mostly backed by real-world assets. DAI holders can also stake their stablecoins in exchange for sDAI from the proceeds generated by staking DAI

Centrifuge: Centrifuge allows anyone to lend assets to institutions in exchange for stable income

Select RWA Narrative Winner

Now I will go over the elements I look for in a RWA project to decide which RWA tokens might be good investments.

Generally speaking, this is what Im looking for:

• Strong community: No community = no one will buy your bag (referring to investment)

• Increase adoption: You can use a tool like DeFiLlama to view statistics for almost any protocol (I usually focus on total value locked TVL and revenue)

• The team is very active on social media: We live in an attention economy. Ideally, youll want to bet on teams that understand the importance of marketing

• Publicly Identified Team: This is not necessary for most projects, but I would say it is very important for real world asset protocols

• Good backers: Projects that have big-name investors like Binance Labs, Coinbase Ventures, a16z, or other investors as investors usually have a good understanding of how to adapt to the new narrative

• Partnerships with financial giants: This isn’t required, but in the case of Avalanche, for example, $AVAX always surges after every new big partnership is announced

• Token Utility: In a bull market, token utility is not very important, but ideally I would like to invest in tokens that directly benefit from the success of the project

Youre unlikely to find a project that meets all of these criteria. But the more conditions that are met, the better.

As I mentioned before, the total market capitalization of the entire real asset cryptocurrency industry is currently around $9 billion. In my opinion, thats very low, and I think it has huge growth potential in this bull cycle.

Almost all coins will rise at the start of altcoin season.

Hopefully, through the investment framework I laid out above, youll be able to find and invest in the great performers of the future.

One final piece of advice:

If you want to invest in RWA tokens for the long term, dont buy RWA tokens that are up 2-3x just because of the recent BlackRock news. Wait for -25-35% price adjustment before placing an order to purchase.

If you are patient, the market will give you the opportunity to buy them at a small discount.