What is TradFi? How is it related to Web3 or the cryptocurrency industry?

Recently, a term has been repeatedly mentioned in the crypto market, which is TradFi. Whether it’s Bitcoin ETFs, institutional entry, or RWA and stablecoin compliance, you can almost always see the shadow of TradFi behind them.

Many users may wonder, what exactly is TradFi? What is its relationship with the crypto market? And what does it mean for ordinary crypto users?

The true meaning of TradFi

TradFi is the abbreviation for Traditional Finance, referring to the familiar traditional financial system, including banks, brokerages, funds, insurance companies, clearinghouses, and the entire set of financial rules and regulatory frameworks built around them. Unlike the crypto market’s emphasis on decentralization, the core characteristics of TradFi are centralization, strict regulation, and compliance prioritization.

In simple terms, TradFi has been the mainstream way of global financial operation over the past few decades, and the crypto market was initially born as its “alternative.”

What TradFi means for the crypto market

In the early days, the crypto market was driven more by retail investors, tech geeks, and high-risk-tolerance funds, with high price volatility and rapidly changing narratives. The entry of TradFi is changing the underlying structure of the market.

When TradFi funds enter the crypto market, they are not here to chase short-term surges but to view crypto assets as a new asset class. This means the market is beginning to be incorporated into more mature valuation systems, with greater liquidity, but also a more rational pace. The emergence of Bitcoin ETFs is an important milestone in the integration of TradFi and the crypto market, allowing traditional funds to allocate crypto assets without directly engaging with on-chain risks.

In the long term, the participation of TradFi helps reduce extreme market volatility and improve overall stability, while also raising the valuation center of mainstream assets.

Why crypto users need to understand TradFi

Many crypto users are accustomed to viewing the market from emotions, narratives, and short-term hot topics, but the logic of TradFi is different. It focuses on whether assets are compliant, whether they have long-term value, and whether there is enough liquidity to support large-scale funds.

Understanding TradFi helps ordinary users see clearly which assets are more likely to benefit in the long run and which are just short-term speculative targets. As the market gradually shifts from purely retail gambling to institutional participation, the gameplay and rhythm will also change. If you still view the current market with early crypto market thinking, it’s easy to make misjudgments.

TradFi is not the opposite of crypto

It’s important to emphasize that TradFi does not mean “exploitation” or “control.” In reality, TradFi brings in larger capital scales, compliance experience, and mature risk management systems, while the crypto market offers technological innovation and efficiency improvements.

The more likely future scenario is not TradFi replacing crypto, but a gradual integration of both. Crypto assets will be embraced by TradFi, and TradFi assets will be tokenized on the blockchain, forming a new financial paradigm.

In conclusion

The entry of TradFi marks that the crypto market is moving from an experimental edge to becoming part of the mainstream financial system. For crypto users, understanding TradFi is not about abandoning the ideals of decentralization but about better understanding the stage the market is in and where it might be headed in the future.