My bull thesis for RWAs

The real-world assets (RWAs) sector is one of the sectors with the highest long-term potential. This is clearly not just another short-term narrative.

There are lots of benefits that real-world asset tokenization brings:

• Easier access
• Transparent audibility
• Near instant settlement speed
• Composability (imagine opening a loan against your tokenized car on a decentralized money market like AAVE)

And I’m convinced that crypto will play a big role in the RWA/tokenization industry.

In this issue, I’ll cover why I’m bullish on RWAs, a few RWA projects on my watchlist, and my strategy for picking the right coins in this sector👇

Why I’m bullish on the RWA narrative

Real-world assets in crypto refers to the tokenization of tangible assets that are brought on-chain.

According to Crypto Koryo’s dashboard, the real-world asset narrative has been the 2nd best-performing narrative this year, outperforming AI.

Source: Dune

But despite this, the Real-World Assets crypto sector still has a tiny total market cap: A bit over $9 billion according to Coingecko.

For context, Boston Consulting Group expects the tokenization of illiquid assets to reach $16 Trillion by 2030. While this prediction might be a bit too optimistic, it’s clear that tokenization has a huge growth potential.

Stablecoins are a good example of real-world assets that have been tokenized and have already found product market fit, with their market cap now being above $150b.

And the recent BlackRock news added more fuel to the fire.

As you might have heard, BlackRock, the world’s largest asset manager, announced a $100M+ tokenized fund on Ethereum a few days ago.

Even though this news is not directly related to any crypto RWA project, speculation about this led to a massive increase in the price of RWA coins.

On top of that, this news is a big deal for one main reason:

BlackRock launching an on-chain tokenized fund legitimizes the on-chain real-world asset industry and paves the way for other institutions to make a similar move.

After BlackRock applied for a spot Bitcoin ETF last year, many other financial giants such as Fidelity also applied shortly after. I don’t think this time will be different.

What’s more, RWAs / tokenization is an easy-to-understand narrative for retail. To outperform the market, you have to invest in coins that retail investors will be willing to buy once they start paying attention to crypto.

Due to all the things I mentioned above, I expect Real-World Assets to be a top-performing narrative in this bull run.

The RWA landscape

As you can see in the image above, this sector has lots of sub-categories, with some of the most important ones including:

• tokenized treasuries & securities
• on-chain private credit
• infrastructure projects (e.g. RWA blockchains)
• real estate
• regenerative finance

There are dozens of interesting RWA projects and it’s impossible to cover all of them. But I’ll focus on a few market leaders and on a few that stand out:

Mantra

Mantra is the first blockchain specifically designed for real-world assets.

Just a few days ago, its team announced that it raised $11M in funding.

Some of the blockchain’s core features include:

• MANTRA Compliance Module - a set of tools to help Web3 platforms comply with regulatory requirements, including KYC protocols & sanctions screening
• MANTRA Token Service Module - a SDK that enables businesses to easily create, issue, distribute, & manage their own digital assets that are compliant with various regulatory frameworks
• Mantra DEX - a DeFi hub that leverages the Cosmos ecosystem to make real-world asset trading easier & more efficient

All in all, the project’s goal is to make it much easier for both businesses and investors, to launch, respectively trade tokenized assets on-chain.

Complying with regulatory requirements has always been a big problem for web3 businesses, and Mantra provides several tools that make this process easier.

Ondo Finance

Ondo provides liquid exposure to institutional-grade financial products such as short-term U.S. Treasuries and ETFs.

The protocol has $220M in TVL and is backed by Pantera Capital and Coinbase.

As I said earlier, with Ondo, you can invest in tokenized US treasuries.

What’s interesting is that after you do that, you can then borrow assets against those tokenized treasuries in DeFi, using a protocol like Flux Finance.

Composability is one of DeFi’s key features as it enables developers to combine multiple DeFi products into a brand new product like Flux did.

It would be interesting to see more RWA projects leveraging DeFi’s composability to enable new use cases.

Avalanche

While Avalanche is mainly known for being an L1 platform for all kinds of dApps, its team has dedicated significant efforts toward tokenization and institutional adoption.

For instance, last year, Avalanche:

• introduced a $50M ecosystem fund to pioneer tokenization
• announced partnerships with financial giants like WisdomTree and JP Morgan
• launched Evergreen Subnets with features tailored for institutions

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

Another interesting development is that Securitize, a popular asset tokenization firm, chose to issue its first tokenized assets on Avalanche last year.

Parcl

Parcl is the first derivatives DEX for real estate markets.

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

Parcl is one of the largest dApps on Solana, with almost 200M in TVL.

Using Parcl, you can easily speculate on the price movements of Real Estate Markets as the platform offers city indexes.

Clearpool

Clearpool is a decentralized credit marketplace.

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

All borrowers sign a legal agreement prior to the receipt of funds to ensure the legal right to pursue borrowers in the case of default.

Interestingly, Clearpool TVL increased by almost 50% in the past weeks.

LandX

LandX has a unique product, as it is the first decentralized RWA platform for investing & trading farmland and agricultural commodities.

The protocol provides capital to real-world farmers in exchange for a legal share of their crop. As LandX farmers’ crop shares are tokenized, you can easily invest in them using the platform and earn an inflation-hedged yield.

Thanks to LandX, commodity vaults are made available as liquid digital assets.

Other honorable mentions:

Florence Finance - The leading Euro-denominated RWA project that connects DeFi to real-world lending

MakerDAO - While MakerDAO is technically not 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 to earn the yield generated by DAI collateral

Centrifuge - Centrifuge allows anyone to lend assets to institutions in exchange for a stable yield

If you want to explore the entire RWA sector, you can check out the RWA category on Coingecko by clicking here.

Picking the RWA narrative winners

Now I’ll cover what I’m looking for in RWA projects for deciding which RWA coins might be good investments.

Generally, this is what I’m looking for:

• strong community - no community = no one will buy your bags
• Increasing adoption - you can use a tool like DeFillama to see the stats of almost any protocol (TVL and revenue are what I’m generally looking at)
• team that’s very active on social media - We live in an attention economy. Ideally, you want to bet on teams that understand the importance of marketing
• doxxed team - this isn’t essential for most projects, but I’d say that it’s very important for real-world asset protocols
• good backers - projects with tier 1 investors such as Binance Labs, Coinbase Ventures, a16z, or other well-known investors generally have a good understanding of how to adapt to new narratives
• partnerships with financial giants - This isn’t a must, but for instance, in the case of Avalanche, $AVAX has always pumped a lot after every announcement of a new big partnership
• token utility - in bull markets the token utility is not very important, but ideally, I want to invest in tokens that directly benefit in some way from the success of the project

It’s unlikely that you’ll find many projects that tick all these boxes. But the more of these criteria are met, the better.

As I also mentioned earlier, the entire Real-World Assets crypto sector currently has a total market cap of ~$9 billion. This is extremely low in my opinion, and I think that it has the potential to increase a lot in this bull cycle.

Almost all tokens will pump when the altcoin season begins.

But hopefully with the investing framework that I presented above you’ll be able to find & invest in the future top performers.

One final tip:

If you want to invest in RWA coins for the long-term, don’t just market buy RWA tokens that are up 2-3x in the past 14 days because of the recent BlackRock news. Wait for a -25-35% price correction and then place your buy orders.

The market will give you the chance to buy them at a small discount if you’re patient.

That’s all for now.

Thank you for reading this issue!

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