4E Observation: Web3 Reaches a Fork in the Road, Idealism Retreats, Institutional Logic Emerges

After experiencing a round of intense market fluctuations, the crypto market is falling into a slump. Market funds are continuously flowing out, on-chain activity is sluggish, and severe mutual liquidation is occurring. After going through a narrative bottleneck, the industry is facing a period of project elimination and structural reconstruction. Behind this deep change, it may also be a turning point for traditional financial order to quietly reconstruct Web3.

Liquidity Exhaustion and Narrative Fog

The current crypto market presents a stark contrast. On one hand, BTC, as the cornerstone of the market, continues to draw in capital, with institutional holdings increasing under the push of spot ETFs, gradually aligning with traditional finance, showing a certain resilience in price. On the other hand, the overall on-chain activity has not kept pace with this round of market movement, and the bubble is bursting rapidly.

This round of increase resembles a structural market, where the market rises, but liquidity has not spread, and funds are repeatedly battling between local assets, leading to severe "mutual liquidation" phenomena. After the airdrop of numerous VC star projects, the real retention rate is extremely low, with users mostly "farming rewards," and altcoins nearly collapsing across the board, leaving the secondary market desolate.

As a narrative-driven market, Web3 has seen various stories unfold, from DeFi to NFT gamefi, and then to ZK, Restaking, modularization, AI, and more. However, the lifecycle of new concepts is becoming increasingly short, and the grounding logic is weakening, leading users to question everything.

When most projects lose their users, funds, and product loops, the market begins to move towards liquidation and elimination. Funds are increasingly concentrating on leading projects like Bitcoin, and the market is no longer paying for narratives, placing greater emphasis on actual value.

Structural Transformation from Freedom to Order

The early days of Web3 were a carnival for retail investors, where grand narratives played out continuously, and FOMO emotions drove countless projects to rise and fall dramatically. Now, the discourse power in the market is shifting towards institutions. Financial giants are accelerating their layouts, and compliance has become a mainstream pursuit for funds. Circle and Visa are testing USDC settlements in global payment networks, Coinbase is promoting US stocks on-chain through Base, and asset management giants like BlackRock and Franklin are launching RWA products, attempting to map real assets onto the chain.

These actions indicate that institutional funds value predictable returns, compliance frameworks, and low volatility more than decentralization and high-risk speculation. The gambler's market dominated by retail investors is being replaced by an institutionalized asset allocation market, evolving from a proliferation of projects to a narrative convergence with regulatory compliance.

Dual Tracks Running Parallel, Coexistence of Ideal and Reality

Amid this change, the crypto industry is showing a clear tendency towards dual tracks. On one hand, there is the familiar "wild flow," the Web3 native faction, pursuing decentralization, technological freedom, and privacy protection; on the other hand, there is the increasingly formed "regulatory flow," seeking compliance, trustworthiness, and a regulated institutional system.

Web3 is no longer a singular utopia; its split into two parallel worlds does not signify the "absorption" of Web3 by traditional finance, but rather Web3's active embrace of reality and the beginning of large-scale applications. The two complement each other, coexisting in the long term, and gradually differentiating in clearly defined spaces: the former is a technological experimental field for a decentralized world, continuing to fight for privacy and freedom; the latter is a compliant version of on-chain financial infrastructure, striving for a mainstream position and resources for Web3. Both will realize their respective values in different scenarios.

Asset Tokenization, Rise of RWA Narratives

The crypto industry is at a critical turning point. Liquidity exhaustion and narrative vacuum have exposed the limitations of speculative models, while the collapse of altcoins highlights the necessity of sustainable models. The only digital dollar that has landed and been widely applied, namely USDT and USDC, which tokenize and map the US dollar onto the chain, has become a compliant and highly profitable business, driving the tokenization of real-world assets (RWA) as the most promising narrative.

Currently, crypto assets are generally poor, but traditional markets are unimaginable. For instance, tokenized US stocks, bonds, and commodities can form a large number of high-quality assets that complement the crypto space. By reaching the world through blockchain networks, trading spot and derivatives without permission, and seamlessly integrating with DeFi, there is immense imaginative space and actual demand.

On-chain finance is no longer limited to the circulation of virtual assets but is expanding to the issuance, settlement, and trading of broad assets. The scenario of "stablecoin payments + on-chain RWA + large-scale user onboarding" presents a familiar logic and structure for compliant funds; for Web3 on-chain protocols, it is a path choice for connecting with the real world. This type of structurally narrative driven by real demand can bring about more lasting and deeper market evolution, potentially carrying hundreds of trillions of dollars in asset scale, injecting vitality into the crypto industry that transcends bull and bear cycles.

However, the current channels connecting traditional finance and crypto finance still face many obstacles, with the market scale being too small and user participation in trading encountering certain barriers. According to data from rwa.xyz, the total value of on-chain RWA assets is approximately $21 billion (excluding stablecoins), mainly consisting of private credit, US Treasury bonds, commodities, stocks, etc., with Ethereum chain assets accounting for more than half, followed by Zksync and Stellar, with the total number of addresses holding RWA assets on-chain being less than 100,000.

Despite the broad prospects for RWA, achieving deep integration between crypto and traditional finance will still take time. Against this backdrop, the one-stop financial asset trading service of the 4E exchange can bridge the gap between traditional finance and Web3.

As a pioneer in the global financial market and a global partner of the Argentina national team, 4E not only supports trading of mainstream crypto assets but also takes the lead in integrating traditional high-quality assets such as US stocks, indices, gold, and foreign exchange into the platform. Users can manage both cryptocurrencies and traditional high-quality assets through a single account, utilizing the characteristics of blockchain to provide a seamless investment experience.