The RWA narrative is so strong, so why are all RWA tokens falling? I believe the logic was flawed from the very beginning.
- Core Viewpoint: The core reason for the continuous price decline of many RWA project tokens lies in fundamental flaws in their token economic model design. Tokens are used as reward tools to subsidize TVL rather than as value carriers, leading to a market with only selling pressure and no buying demand. Successful RWA projects should prioritize building high-quality underlying assets and make tokens the key to accessing the returns from these quality assets, thereby creating genuine demand.
- Key Elements:
- The on-chain RWA market (e.g., treasuries) has surpassed $4 billion and continues to grow, with numerous traditional financial institutions like BlackRock and Franklin Templeton already participating.
- Despite TVL growth, the token prices of most RWA projects have fallen over 90% from their highs, exhibiting a "death spiral": using token rewards to attract TVL leads to users continuously selling tokens, causing price declines.
- The fundamental problem is the flawed token model: holding tokens provides no additional benefits. Users only need to deposit assets to earn RWA yields, leaving tokens with no inherent purchase demand.
- The solution is for projects to focus on acquiring high-quality RWA assets characterized by high APY, strong consensus, stability, and security, rather than complex token incentives.
- The correct role for a token should be: holding tokens unlocks access to superior assets, higher yields, or priority allocations, allowing asset demand to translate into token demand and form genuine buy-side pressure.
I've been thinking for a long time about whether to write this. I have projects in the RWA space, so writing this feels a bit like shooting myself in the foot. But this question really deserves a direct answer.
On-chain treasuries have surpassed $4B+, growing more than threefold in a year. BlackRock's BUIDL fund attracted hundreds of millions of dollars in a single quarter. Franklin Templeton and HSBC are entering the space. RWA TVL is one of the few metrics still rising in this bear market.
But then you look at the tokens of these projects—almost all in the red, and deep red at that. Some have fallen over 90% from their highs.
Why?
Some would say: retail can't get in. This answer is half right, but it's outdated. There are already projects in the market solving this—just register, and retail users can also participate in RWA yields. The gate for user access has been opened. But the token price is still falling.
I believe many RWA projects have fundamentally misunderstood the nature of the project from the very beginning
The RWA product + TOKEN needs each to perform its own function; the token economic model is designed incorrectly from the start.
The most common death spiral formula for all RWA-related TVL category projects looks like this:
Users deposit TVL to earn RWA yields → simultaneously issue tokens as additional rewards → users continuously sell tokens → token price falls → issue even more tokens as subsidies → no one dares to buy the token
The essence of this logic is: the token becomes a subsidy tool, not a value carrier.
If you think about the business logic this way, then token holders have only one action—sell. No one needs to buy the token because there's no extra benefit to holding it. If you want RWA yields, just deposit assets directly; you don't need to hold the token at all. This creates a market with perpetual selling pressure and no buying interest.
Many DeFi projects have died here. Deposit TVL for yields, then give airdrops, then give token rewards. Issuing round after round. No one buys, only sells. The project's treasury holds more and more tokens, the price gets driven lower and lower, and finally, it falls into a liquidity death spiral.
The RWA track is now repeating this same mistake.
So what should be done?
Because I work on strategic consulting and growth strategies, boiling the problem down to its essence is about the RWA business itself.
RWA projects should focus their resources on one thing—finding truly good RWA assets.
Not designing increasingly complex token incentive systems.
What is a good RWA asset? Four criteria:
- Attractive APY. The yield must be compelling enough for users, competitive compared to TradFi, and certainly not lower than bank wealth management products.
- Consensus. The asset itself must have market recognition—treasury bonds, credit products backed by well-known institutions—assets users understand and trust.
- Stability. Not a high-risk, high-reward speculative product. The core value proposition of RWA is stable, real yield.
- Security. Risk control on the asset side is solid; the underlying assets won't implode.
When the underlying assets are good enough, users will naturally come for the yield. At that point, the token's role should be: holding the token unlocks access to better assets, higher yield percentages, and priority allocation.
Demand flows from the asset side to the token side, creating a genuine reason to buy. Not the other way around—using token subsidies to attract users, only to find that no one actually wants to hold the token.
The RWA narrative is real, the data is real, and institutions entering is real.
But no matter how strong the narrative, it can't support a token model that is fundamentally flawed by design.
The next RWA project that truly breaks out, I predict, will be the one that first solidifies its asset side before talking about token value. It won't rely on token rewards to pump TVL, but will use TVL to support the token. Get the order wrong, and no narrative or market guru can save it.
Good assets attract users, users support the token. Doing it the other way around is using the token to subsidize a product nobody truly wants.
