The RWA craze signals the acceleration of TradFi embracing Blockchain? Leveraged tokens may become the best intersection between traditional and encryption finance.

The Crypto Assets market seems to have a clear trend - incremental funds are largely coming from the TradFi sector.

In Hong Kong, despite regulators taking a cautious approach to the crypto market, traditional banks, leading internet companies, and large financial institutions are still actively laying out plans for stablecoins and RWA (Real World Assets, tokenization of real-world assets). This wave has even surprised some industry insiders: why are traditional institutions so enthusiastic? In contrast, it seems that the new entrepreneurs and innovative opportunities native to the coin circle have not erupted simultaneously. The same is true for the U.S. market, where giants like BlackRock and Fidelity have entered the fray, driving Bitcoin ETFs to set records for fund inflows, while RWA projects like Ondo Finance and MakerDAO's Dai savings rate adjustments have also attracted a large amount of traditional funds.

This trend indicates that TradFi is accelerating its embrace of blockchain, while the crypto market is actively drawing on the product design of TradFi. Against this backdrop, Leveraged Tokens, as an innovative product that combines the flexibility of DeFi with the advantages of traditional leveraged ETFs, are becoming a focal point of attention for investors again.

Why are both TradFi and the crypto market exploring leveraged products?

Whether it's the "leveraged ETF" in the traditional market or the "leveraged tokens" in the crypto market, their core goal is to provide investors with leveraged market exposure without directly using margin.

1. Traditional Leverage ETF: Institution-led, Clear Regulation

Leveraged ETFs have a long history in the TradFi market, with main characteristics including:

• Strictly regulated, transparent operation
• Daily Rebalancing, ensuring stable leverage ratio
• Suitable for medium to long-term allocation, avoid contract roll-over losses
• Lower fees, more user-friendly than futures contracts

In recent years, the investment scale of ETFs in the domestic market has shown linear growth, thanks to their low cost, high transparency, and no liquidation risk advantages.

2. Leverage Tokens: Innovation in Crypto Assets

Leveraged tokens go a step further, combining the characteristics of blockchain:

• No liquidation risk: Maintains leverage through an automatic rebalancing mechanism, unlike contract trading which can be forcibly liquidated.
• 24/7 Trading: Not restricted by traditional market opening and closing hours.
• Decentralized Custody: Users have full control over their assets without needing to trust a third party.
• Low Threshold: No margin required, small funds can participate.

Opportunities for Leverage Tokens Amidst the RWA Wave

As RWA becomes the market focus, the pace of traditional funds entering the Crypto Assets market is accelerating. These funds are accustomed to structured financial products, and leverage tokens happen to provide exactly that:

• Experience similar to TradFi (such as leveraged ETFs), but with more flexibility
• High Efficiency of Decentralized Finance (DeFi)
• Broader application scenarios, such as creating leveraged yield strategies in conjunction with RWA assets.

Future Trends: The Integration of TradFi and Crypto Assets Leverage Products

1. More institutional-grade leveraged tokens
2. RWA+Leverage Token Combination: For example, tokenized US Treasuries + leverage strategy, providing stable income enhancement solutions.
3. Cross-chain leverage products: Enable assets from different ecosystems to be seamlessly combined.

Leveraged Tokens - The Best Intersection of TradFi and Crypto Assets?

The explosion of RWA has accelerated the inflow of traditional funds into the crypto market, and leveraged tokens, with their advantages of no liquidation, low cost, and high flexibility, may become one of the preferred tools for these funds.

For investors, now is the time to gain a deeper understanding:

• If you come from TradFi, leveraged tokens provide a similar experience to leveraged ETFs, but with more innovation.
• If you are a crypto native user, leveraged tokens are safer than contracts and are suitable for medium to short-term strategies.

Regardless of the background, leveraged tokens could be an important investment tool in the next phase of the market. With the continued entry of RWA and traditional institutions, its potential has just begun to be unleashed.

Leveraged tokens represent the forefront of financial innovation, providing investors with richer choices. This is also one of the reasons why Gate continues to operate and develop this product form. We are committed to meeting users' diverse crypto trading needs. Understanding the nuances of these tools will help you seize opportunities in the rapidly changing market while effectively managing risks.

Click to go to the Gate leverage token area 👉 https://www.gate.com/etf

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