Why are all the RWA coins falling despite the strong RWA narrative? I think the logic was flawed from the very beginning

I thought for a long time about whether to write this. I have projects in the RWA direction, and writing this feels a bit like slapping myself in the face. But this question really deserves a straightforward answer.

On-chain government bonds exceed $4B+, tripling in a year. BlackRock's BUIDL fund attracted hundreds of millions in a single quarter. Franklin Templeton and HSBC are also entering the market. The TVL of RWA is one of the few data points still increasing in this bear market.

But if you open these projects' tokens------almost all are in the red, trending downwards. Some have dropped over 90% from their peak.

Why?

Some might say: retail investors can't get in. This answer is half correct but outdated. There are already projects in the market addressing this issue------registration is enough, and retail users can also participate in RWA yields. The entry barrier for users has been lowered. But token prices are still falling.

I believe many RWA projects never understood the essence of the project from the beginning.

RWA products + TOKEN need to fulfill their respective roles.

The token economic model is designed incorrectly.

The most common death 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 drops → continue issuing more tokens as subsidies → no one dares to buy tokens.

The essence of this logic is: tokens have become a subsidy tool, not a value carrier.

If you think about the logic of business this way, then the only action for token holders is------to sell. No one needs to buy tokens because there are no additional benefits from buying. If you want RWA yields, just deposit assets; there’s no need to hold tokens at all. This turns into a market that only has selling pressure and no buying interest.

Many DeFi projects have died here. Deposit TVL for yields, then give airdrops, then give token rewards. Round after round. No one buys, only people sell. The tokens on the project’s balance sheet keep increasing, prices keep dropping, and eventually, they fall into liquidity exhaustion.

The RWA track is now repeating this mistake.

So what should be done?

Since I work on strategic consulting growth strategies, the core issue boils down to the business of RWA itself.

RWA projects should focus their resources on one thing------finding truly good RWA assets.

Rather than designing increasingly complex token incentive systems.

What are good RWA assets? Four criteria:

1. Attractive APY. The yield must be compelling enough for users, competitive compared to TradFi, and not lower than bank wealth management products.
2. Consensus. The assets themselves must have market recognition, such as government bonds or credit products backed by well-known institutions, which users can understand and trust.
3. Stability. Not high-risk, high-reward speculative products; the core value proposition of RWA is stable, real returns.
4. Safety. Risk control on the asset side must be solid, and the underlying assets should not face sudden failures.

When the underlying assets are good enough, users will naturally come in to earn yields. At this point, the role of the token should be: holding tokens unlocks better assets, higher yield ratios, and priority allocations.

Demand is transmitted from the asset side to the token side, forming a real reason to purchase. Instead of the reverse------using token subsidies to attract users, only to find that no one wants to hold the tokens.

The narrative of RWA is real, the data is real, and institutions are entering the market is real.

But no matter how strong the narrative is, it cannot support a token model that is fundamentally flawed in design.

The next truly successful RWA project, I predict, will be the one that first solidifies the asset side before discussing the value of the token. It will not rely on token rewards to pull in TVL, but rather on TVL to support the token. If the order is reversed, no narrative or market guru can save it.

Good assets attract users, and users support tokens. Doing it the other way around means using tokens to subsidize a product that no one truly wants.