A new story in on-chain finance: DeFi deposits fell by 15%, while RWA deposits increased to $7.4 billion

Written by: Xiao Bing, Shen Chao

A report jointly released by CoinShares and Token Terminal on August 6 provides a set of data.

In Q2 2026, total deposits in DeFi decreased by approximately 15% year-on-year. During the same period, on-chain real-world asset (RWA) deposits skyrocketed from $2.33 billion to $7.44 billion, an increase of over 200% year-on-year. The total trading volume of DEX spot trading plummeted by about 70% year-on-year, while RWA spot trading volume grew against the trend by about 220%.

The contraction in DeFi is partly due to crypto-native assets, while the growth is almost entirely from traditional financial assets being tokenized: U.S. Treasury bonds, money market funds, private credit, gold, crude oil, and stock index futures.

This is the current state of crypto finance.

DeFi is Contracting, RWA is Expanding

DeFi TVL has continued to decline in 2026. It dropped from about $115 billion at the beginning of the year to a year-to-date low of $69.4 billion in early June, with a decline of nearly 40%. The foundational DeFi on Ethereum fell by 43%, Arbitrum dropped by 55%, and Plasma fell by nearly 75%.

The factors driving this decline are clear: BTC entered a downward cycle from its historical high of over $122,000 in October 2025, leading the entire crypto market to deleverage; declining yields resulted in arbitrage cycles and recursive lending unwinding; additionally, there have been 121 hacking incidents in 2026, with cumulative losses of about $942 million. After Kelp DAO was hacked for $293 million on April 18, Aave users withdrew about $15 billion in deposits within four days.

Confidence is waning, leverage is being unwound, and speculative funds are exiting, which is the "crypto-native" aspect of DeFi's contraction.

In stark contrast to the contraction of crypto-native DeFi is the explosion of RWA deposits.

According to the report, the main components of RWA deposits are: tokenized treasury bond funds (represented by BlackRock's BUIDL, which had an AUM of about $2.87 billion by mid-July, making it the largest single tokenized treasury bond product), yield-bearing stablecoins (Sky Protocol's sUSDS led this category in Q2), multi-strategy funds, and private credit. The common feature of these assets is that they generate yield while being used as on-chain collateral and lending targets, allowing investors to retain the underlying asset's yield while obtaining on-chain liquidity.

Lending protocols like Aave, Morpho, and Kamino are increasingly accepting RWA as collateral. Users can borrow stablecoins using tokenized treasury bonds instead of having to collateralize ETH or BTC as before. The latter can fluctuate by 30%, while the former's volatility is almost zero. For lending protocols, this means less liquidation risk; for borrowers, it means higher capital efficiency.

Ethereum accounts for nearly 70% of the RWA lending collateral market.

CoinShares explains that both borrowers and lenders prefer markets with deep liquidity, and Ethereum still has no rivals in terms of large transactions and institutional capital inflows. Solana has seen rapid growth on the spot trading side, while Hyperliquid has emerged strongly in the derivatives space.

By mid-2026, the total on-chain value of RWA (excluding stablecoins) reached about $37.89 billion, with nearly 789,000 holder addresses. The tokenized U.S. Treasury bond category has grown from less than $1 billion at the beginning of 2025 to over $15 billion, with BlackRock controlling about 40% of the market share.

Derivatives Explosion

If the deposit data reflects "assets on-chain," then the derivatives data reflects "trading on-chain."

RWA perpetual contracts have exploded from a nearly non-existent category to one of the main forces in on-chain trading in less than six months. Quarterly trading volume surged from $12.37 billion in Q4 2025 to $202.7 billion in Q2 2026, an increase of about 16 times. Data from DWF Ventures at the end of July showed that RWA perpetual contracts once accounted for 37% of the total trading volume of all perpetual contracts in the market.

TradeXYZ on Hyperliquid is the largest player in this field, with a cumulative trading volume of $350.7 billion, far exceeding Binance's $42.1 billion. The open interest of RWA perpetual contracts on Hyperliquid reached a historical high of $2.65 billion in May, doubling within two months. The trading targets are concentrated in commodities (accounting for 70-95%), but equity perpetual contracts surged by 121% month-on-month in May, with the S&P 500, Nasdaq 100, and tech stocks becoming the fastest-growing categories.

What does this mean?

A decentralized exchange built on crypto-native infrastructure sees nearly half of its trading volume coming from crude oil, gold, the S&P 500 index, and Nvidia stocks, which have nothing to do with cryptocurrencies. Hyperliquid is no longer just a DeFi protocol; it is transforming into a 24/7 global trading venue for financial assets.

Circle co-founder Jeremy Allaire remarked after seeing this data: The crypto market is shifting from "speculation on endogenous digital goods" to the external.

Not Replacement, but Embedding

When these data points are pieced together, the picture becomes clear.

On-chain finance is growing, but the sources of growth have quietly changed. The on-chain boom of 2021 was driven by token incentives through liquidity mining cycles: protocols issue tokens → users deposit assets to earn tokens → token prices rise → more people come to deposit, essentially an internal cycle of crypto assets. This cycle collapses rapidly when the market cools, and the decline of DeFi TVL in 2026 is a continuation of this collapse.

The on-chain growth in 2026 is driven by entirely different factors. BlackRock is moving U.S. Treasury bonds onto Ethereum, attracted by the faster, cheaper, and always-on nature of on-chain settlement compared to traditional settlement. Institutional investors are using tokenized treasury bonds as collateral for lending on Aave, aiming to achieve both a 4.5% treasury yield and on-chain liquidity simultaneously. Traders are engaging in crude oil perpetual contracts on Hyperliquid to ensure that when geopolitical events erupt on Sunday evenings, traditional markets are closed, but the on-chain market is not.

CoinShares CEO Jean-Marie Mognetti provided a judgment in the report: When an asset class grows against the downward cycle of its host ecosystem, it indicates that demand is driven by financial utility and is unrelated to market cycles.

The growth of RWA does not rely on a crypto bull market, token incentives, or speculative sentiment. It relies on real improvements in settlement efficiency, 24/7 liquidity, and capital efficiency.

A set of numbers is enough to illustrate the gap. The global stock market exceeds $100 trillion, while the currently tokenized portion on-chain is about $2.2 billion, with a penetration rate of 0.002%. CoinShares compares the current stage to stablecoins in 2019, where the concept has been validated, the infrastructure is just being laid, but large-scale adoption will take time.

The GENIUS Act was signed into law in July 2025, providing a federal-level regulatory framework for stablecoins. The OCC has already issued national trust bank charters to companies like Circle and Paxos. Regulatory clarity is releasing previously hesitant institutional capital. In May, BlackRock applied to the SEC for two new tokenized funds, along with an on-chain share of a $7 billion money market fund. This company, managing over $10 trillion in assets, is upgrading tokenization from an experimental project to a product line.

The $7.44 billion in RWA DeFi deposits means that DeFi has only absorbed about 20% of the total on-chain real assets of $37.89 billion. The report suggests that the current RWA deployed in DeFi lending is about $2.5 billion, compared to over $30 billion in tokenized asset base, indicating a 12-fold expansion potential, provided that technological and regulatory barriers continue to be removed.

The narrative of growth in on-chain finance is being rewritten.

In the last cycle, the story told by the crypto industry was that DeFi would replace banks. The data from this cycle indicates that replacement has not occurred. What is happening is that bank assets are beginning to choose blockchain as their settlement layer.

Blockchain has not replaced Wall Street; it is becoming a new conduit for Wall Street.