Cryptocurrency yield products are steadily catching up with traditional finance (TradFi), driven by stablecoins, liquid staking tokens (LSTs), and tokenized real-world assets (RWAs), according to a report co-authored by RedStone Oracles, Gauntlet, Stablewatch, and the Tokenized Asset Coalition.
Currently, only 8% to 11% of cryptocurrencies offer passive income opportunities, compared to 55% to 65% of TradFi assets, highlighting a fivefold disparity. The report emphasizes that blue-chip yield tokens, RWAs, and yield-bearing stablecoins are quickly narrowing this gap, especially as regulatory clarity improves.
The GENIUS Act, passed in July, has been a major catalyst. The legislation defines collateral requirements for stablecoins and enforces Anti-Money Laundering compliance, helping stabilize the market. “As clarity emerges, yield-bearing stablecoins are exploding: market capitalization is up 300% YoY, with new protocols launching monthly to capture the opportunity,” the report noted.
Liquid staking tokens boost capital efficiency
Blue-chip staking tokens, including Ether ETH$3,453 LSTs and Solana SOL$156.22 LSTs, are seeing rising adoption, enhancing capital efficiency for stakers and institutional participants. Ether LSTs grew from 6 million to 16 million in the past two years, representing a notional value of $34 billion at current prices.
Lido’s stETH (STETH) exemplifies this trend, providing stakers with tradeable equivalents of their staked tokens that can be deployed across DeFi protocols. Similarly, Solana LSTs doubled from 20 million in January 2024 to 40 million today, with 67% of the Solana supply now locked in staking smart contracts.
Crypto yield poised for exponential growth
The report projects that yield-generating crypto assets are positioned for “exponential growth” in the coming months, as institutional capital increasingly seeks efficiency. “As the ‘Crypto-as-infrastructure’ thesis gains traction and onchain finance proves its superior capital efficiency, yield-generating crypto assets are positioned for exponential growth,” it stated.
Yield-generating tokens, such as Solana LSTs, are attracting institutional interest with passive yields around 4%, creating opportunities for both retail and professional investors. With stablecoins, RWAs, and LSTs bridging the DeFi-TradFi yield gap, analysts say the sector is entering a new phase of adoption and growth.