Beneath the surface prosperity, institutional funds have never truly entered, and this technological revolution is falling into a death spiral of retail self-indulgence.

JPMorgan's latest report is like a deep-sea bomb, shattering the glamorous facade of DeFi and asset tokenization. Analyst Nikolaos Panigirtzoglou hits the nail on the head: the total locked value (TVL) in DeFi has not yet recovered to the 2021 peak, and the seemingly bustling on-chain activities are still driven by retail and crypto natives.

Institutions watch coldly, even as compliance infrastructure like lending pools and KYC vaults are ready. This report tears open the industry's most painful wound—what we thought was prosperity is merely a mirage!

1. Data truth: TVL recovery is an illusion, retail becomes the last 'buyer'.

On-chain data reveals a harsh reality: despite Bitcoin's price having long surpassed its previous highs, DeFi TVL is still struggling in the mire, even failing to reach the peak levels of the 2021 bull market.

Every transaction tells the same story—true 'big money' has not entered the market at all. JPMorgan's report confirms: currently, over 70% of on-chain activities are supported by retail and crypto-native users.

Institutional wallets? Still empty as ever!

This exposes the industry's fatal weakness: without traditional capital infusion, DeFi liquidity is just water without a source. When retail enthusiasm runs out, what awaits the market is a deeper collapse.

2. Why are institutions watching coldly? Three major 'fatal shackles' emerge.

Regulatory maze: Global regulations are like a broken puzzle, with the U.S. SEC, EU MiCA, and various Asian country policies conflicting. The same token trade is securities in New York and commodities in Singapore, making it hard for institutions to move.

Legal black hole: The legal status of on-chain assets remains a gray area. When smart contracts are attacked, can institutions seek court compensation? No one can answer! The legal vacuum makes hundreds of billions in funds hesitate.

Security nightmare: The shadow of a $30 million overnight loss due to oracle vulnerabilities on a certain RWA platform in 2023 still looms large. What institutions fear most is not risk, but uncontrollable risk!

'The efficiency of the traditional financial system has significantly improved through existing financial technology, and financial institutions have limited willingness to adopt blockchain'—this report reveals the truth.

Without pain points, where is the disruption? When the traditional financial system operates well, why would institutions take risks!

3. Asset Tokenization: Is the $25 billion bubble bursting?

JPMorgan's data exposes the last veil: although the current scale of tokenized assets has reached $25 billion, with tokenized bonds at $8 billion, the vast majority of projects are still 'bonsai experiments'—small scale, exhausted liquidity, and hard to escape a premature fate.

The so-called 'bond tokenization revolution' is merely transferring offline processes onto the chain, with minimal efficiency gains.

The more brutal reality is: tokenized assets are caught in a liquidity trap. A certain fragmented NFT art project has become digital scrap metal due to a lack of buyers. Without a deep secondary market, all tokenization is just paper wealth!

4. The dual strangulation of regulation and security: the death spiral is accelerating.

The regulatory sword hangs high: the U.S. includes securities-type RWAs in (Securities Law) for strict enforcement, while China directly prohibits non-listed companies from tokenizing assets for fundraising. Entrepreneurs are forced to flee to offshore havens like Jersey and Bermuda.

A hacker feast begins: smart contract vulnerabilities, oracle manipulation, governance attacks... DeFi has become a cash machine for hackers. Security firm CertiK reports that on-chain losses in the first half of 2025 surged by 200% year-on-year!

When compliance costs outweigh profits, and security risks consume returns, institutions will always watch coldly from the sidelines.

5. A glimmer of hope in the darkness: RWA undercurrents have broken through the trillion-dollar line!

Breaking through a path in desperation: truly smart capital has long shifted to the RWA (Real World Asset On-chain) battlefield! By 2025, the global RWA market size will soar to $2.3 trillion.

BlackRock's $5 billion U.S. Treasury bond tokenization (rUSDC) enters MakerDAO, with an annual return of 4.5%, crushing traditional funds.

Real estate fragmentation revolution: The BitEstate platform splits New York Manhattan apartments into 100,000 tokens, allowing retail investors to become 'landlords' for just $100, with an annual return of 6%.

Green finance nuclear explosion: EU carbon credit tokenization, China's solar power station output transformed into on-chain assets, and the global clean energy investment threshold drops to zero!

This is the real breakthrough point! When every token is backed by real assets and every profit comes from real economic activities, regulations fall silent, and institutions scramble for shares!

History is repeating itself: just as the 2021 NFT craze left a mess in its wake, today DeFi and superficial asset tokenization are devolving into a casino that institutions avoid and retail self-indulge in.

But true opportunities are born out of despair—The RWA (Real World Asset Tokenization) track is surging with undercurrents. BlackRock's $5 billion U.S. Treasury bonds on-chain, fragmented sales of Manhattan mansions, Tesla's 72-hour on-chain financing in the supply chain... these cases have ignited a $2.3 trillion market fuse.

Only when the tide goes out can we see who is 'on-chain' and who is 'hanging themselves'! Lao Zhu summarizes:

The days of retail investors cutting each other's throats in the DeFi casino are coming to an end; RWA is the Noah's Ark tethered to real assets! Brothers looking to copy institutional homework should keep a close eye on these three knives:

Tokenization of Treasury bonds (annualized 5% baseline)

Real estate fragmentation (rent collection + appreciation)

Energy revenue rights tokens (solar, wind energy earn dividends passively)

In the next issue, Lao Zhu’s internal group will expose BlackRock's latest RWA holdings list. Click to follow to avoid missing out ▶️ If you miss this train, you won't even smell the exhaust in the next surge!