Aave Founder: RWA is the biggest opportunity in DeFi recently, but caution is needed as institutions may use DeFi as an exit liquidity channel

Gate News reports that on March 8, Aave founder Stani.eth stated that the private credit market is under pressure in a high-interest-rate environment. Since the Federal Reserve began raising interest rates in 2022, rates have quickly risen above 5% and remained high, significantly increasing borrowing costs for companies and consumers. Recent data shows several funds experiencing stock price declines and redemption pressures, such as Blue Owl Capital, which has fallen about 50% over the past year, and Blackstone’s BCRED facing approximately $3.7 billion in redemption requests in Q1 2026. On average, BDCs are trading at about a 20% discount, with yields of 10-11%, and some funds’ default rates have risen to 9%.

Stani.eth outlined three risk scenarios: a single fund default could be absorbed by the system; multiple fund defaults might trigger a credit cycle downturn; a complete collapse could lead to systemic risk. However, the overall private credit market is approximately $1.8 to $2 trillion, making a systemic crisis from a single fund default unlikely.

Stani.eth pointed out that for DeFi investors, the biggest risk is that many retail users investing in high-yield RWA may not fully understand the risks involved. He believes RWA is one of the biggest opportunities in DeFi recently, but the main concern is that institutional speculators might view DeFi as a channel to sell off illiquid and distressed products that Wall Street has lost confidence in, effectively using DeFi participants as exit liquidity.

Stani.eth stated that well-functioning on-chain private credit can offer advantages that traditional finance cannot match. DeFi can enforce redemption windows, withdrawal limits, collateral ratios, and profit-sharing rules through smart contracts, ensuring transparent and immutable execution, preventing traditional fund managers from arbitrarily tightening redemption policies. Carefully structured RWA projects can provide transparent and secure investment channels between traditional finance and on-chain markets. He emphasized that DeFi should not become a source of exit liquidity for Wall Street.