Will Web3's ultimate fate be just another card game played on Wall Street?

For a long time, many natives of the crypto world were captivated by a grand narrative: Web3 would revolutionize Web2; simply by moving Nasdaq stocks onto the blockchain and replacing the NYSE's matching engine with smart contracts, RWA could ultimately reshape global finance. Looking at the constantly fluctuating candlestick charts, we need to remember this date: November 10, 2023. On this day, due to strong market expectations for the approval of US spot ETFs, institutional funds aggressively deployed through compliant channels, causing CME's holdings to surge and surpass Binance. CME data on that day: Holding reached approximately 111,100 BTC, with a nominal value of approximately $4.08 billion (at the time, accounting for approximately 24.7% of the total holdings across the entire network). Binance data: Holding approximately 103,800 BTC, with a nominal value of approximately $3.8 billion. We must acknowledge a harsh reality: this is a one-sided annihilation! Let's look at the image below. Process 1 in the image represents the expansion of traditional finance (TradFi) into the crypto space, such as CME launching futures and BlackRock launching ETFs; Process 2 represents the penetration of crypto finance into traditional assets, such as the tokenization of US stocks and RWA (Real-World Assets). The current market provides a clear answer: Process 1 is progressing rapidly, while Process 2 is facing significant challenges. The core of this difference lies not in technology, but in the liquidity devastation caused by "compliance costs." Why can Wall Street giants easily penetrate the heart of the cryptocurrency market, while we struggle to breach their borders? The marginal cost in economics explains everything. For CME, CBOE (Chicago Board Options Exchange), EUREX (European Futures Exchange), or SGX (Singapore Exchange), the marginal cost of listing Bitcoin derivatives is virtually zero. These financial behemoths possess clearing licenses that have been operating for decades, extremely sophisticated risk control models, and dedicated networks connecting them to top global hedge funds. For them, Bitcoin is simply another ticker after gold, crude oil, and soybeans. They don't need to rewrite the underlying code, rehire compliance teams, or even re-educate their clients. They only need to submit a filing to the CFTC (Commodity Futures Trading Commission), modify some parameters, and a new, compliant market capable of handling hundreds of billions in liquidity is born. Looking back at process 2, when crypto exchanges attempted to "tokenize US stocks," they faced an insurmountable obstacle. The undeniable compliance costs: Remember FTX's once-proud equity tokens? They were not only one of the triggers for its downfall but also seen as a cardinal sin by regulators. For a crypto-native platform to compliantly allow users to buy Tesla stock with USDT, it needs a securities brokerage license, a clearing license, to resolve cross-jurisdictional securities law conflicts, and an extremely complex KYC/AML process. The compliance costs are not linear but exponential. For crypto-native companies, this is a war that's over before it even begins. Traditional finance is not only compliant itself, but it is the rule-maker. Why are compliance costs so important? Because compliance directly determines security, and security determines the entry threshold for capital. Retail investors in the crypto market often misunderstand the source of "liquidity." True liquidity doesn't come from the few thousand dollars held by retail investors, but from pension funds, endowments, sovereign wealth funds, and large market makers. These behemoths face extremely stringent fiduciary duties. This explains why the approval of the Bitcoin spot ETF in 2024 was a historic turning point. Before ETFs, a traditional family office wanting to allocate Bitcoin needed extremely complex approval processes: Who manages the private keys? What happens if the exchange collapses? How is an audit conducted? ETFs and CME futures perfectly solve this problem: no need to manage private keys, no need to trust offshore exchanges, everything is done within a US stock account. CME's Bitcoin futures open interest has repeatedly hit new highs. Behind this isn't retail investor speculation, but rather Wall Street institutions engaging in basis arbitrage and risk hedging. Top high-frequency traders like Jump Trading and Jane Street enjoy lower latency in CME's server rooms than on AWS. As CBOE plans to re-enter the crypto derivatives market, and as SGX and EUREX begin establishing compliant derivatives channels in Asia and Europe, we are seeing a clear trend: the pricing power of crypto assets is shifting from offshore, unregulated exchanges (such as the early BitMEX, and now some offshore CEXs) to regulated traditional financial exchanges. Just as crude oil futures don't require owners to actually move crude oil, the future of crypto finance won't require investors to actually use decentralized wallets. In this process, cryptocurrency itself has been stripped of its "currency" payment attributes and its "censorship-resistant" ideology, purified into a purely high-volatility financial instrument. It has been encapsulated in ETFs, packaged into futures contracts, and stuffed into traditional 60/40 asset allocation portfolios. The conclusion seems predetermined: Web3 finance (especially the secondary market trading portion) will most likely be integrated into Web2 finance, becoming a trading category within traditional finance. This may sound unpleasant to crypto fundamentalists, but it is precisely a sign of asset maturity. The future landscape may look like this: the underlying blockchain technology (Web3) will still be responsible for asset generation and ownership confirmation, but in the vast financial superstructure built by trading, clearing, and derivatives, the Web2 giants, with their low-cost compliance advantages, will still occupy the main positions at the table. For investors, understanding this is crucial. Where liquidity is, alpha is. And right now, liquidity is irreversibly flowing back to those in suits.