On February 10th, Chainlink co-founder Sergey Nazarov published a lengthy article on the X platform, providing an in-depth analysis of the current crypto market cycle. He stated that market cycles are a normal occurrence in the crypto industry, and what truly matters is the level of industry progress revealed by each cycle, as well as which trends will define the entire industry in the next phase.
This cycle's test: Industry resilience has significantly improved.
Nazarov points out that this cycle reveals two key signals. First, there has been no large-scale risk management failure in the market, nor has it triggered widespread systemic risk. He recalls that in the previous cycle, the FTX crashed and many lending institutions were liquidated during the sharp price decline, but this time "reassuringly, these things did not happen, at least not on a systemic scale."
He believes that if the crypto industry and its systems can successfully withstand significant drawdowns and liquidity tests, then both retail and institutional funds can allocate more confidently to this sector.
This time, the risk management (of the industry) is much better than the last time.
RWA's growth is decoupled from its price; on-chain perpetual contracts challenge traditional finance.
The second key signal is the accelerating pace of real-world assets (RWAs) migrating on-chain, unaffected by the prices of Bitcoin or other cryptocurrencies. Nazarov emphasizes that this indicates on-chain RWAs are not tightly pegged to cryptocurrency prices, but rather offer independent and unique value, capable of growing autonomously beyond market pricing.
He specifically mentioned that the on-chain perpetual contract (perps) market has already created competition with the traditional financial perpetual contract market in traditional commodities such as silver. "Especially when trading in permissioned traditional markets becomes more difficult or riskier, the on-chain permissionless market shows a clear advantage." As more RWA data is put on-chain to support the operation of perpetual contracts for various assets, he expects this trend to only increase.
Three major trends converge to propel the industry toward the mainstream.
Nazarov further elaborated on the three key trends he believes will collectively reshape the industry landscape in the next phase:
First, on-chain perpetual contracts and RWA tokenization have unique and enduring long-term value—including 24/7/365 markets, on-chain collateral management, and on-chain data—and this value is not affected by other dynamic factors and is growing autonomously.
Second, institutional adoption will be driven by the fundamental and technological value offered by the crypto industry and will accelerate under the impetus of DeFi's permissionless, 24/7 market.
Third, the infrastructure that enables RWAs to operate will face greater demand – as more real-world assets are put on-chain in the form of perpetual contracts or tokens, and the on-chain operation of these RWAs becomes increasingly complex, more systems will need to interface with the blockchain.
The first two trends are inevitable market forces that are now accelerating regardless of cryptocurrency prices—this is the real insight I've seen from this cycle.
Chainlink's three pillars: data, connectivity, and coordination
When discussing Chainlink's role in this industry transformation, Nazarov summarized its role into three pillars.
At the data level, Chainlink is the leading data provider on the blockchain, serving the vast majority of data needs in the DeFi ecosystem with a market share exceeding 70%. Whether it's market data for on-chain perpetual contracts, proof of reserves for stablecoins, or net asset value (NAV) for tokenized funds, data is the foundation upon which most RWAs can exist on-chain. He also mentioned partnerships with leading institutional data providers such as S&P and ICE, which have enabled Chainlink to achieve a similar leading position in the growing institutional RWA space.
At the connectivity level, both cross-chain interoperability and integration with existing backend systems are key to expanding liquidity. Chainlink has been selected by top Web3 security teams as the official cross-chain bridging provider and is also the only system that has successfully introduced traditional financial payments into multi-chain transactions, integrating existing and new liquidity sources into a unified interoperability layer.
At the orchestration level, Nazarov pointed out that the Chainlink Runtime Environment (CRE) appears to be the only environment currently capable of orchestrating multiple blockchains, off-chain systems, market data sources, and even multiple AIs into a single application. Enterprises are already using it and have deeply integrated it into several key systems. He also previewed that CRE will bring new privacy solutions, stating, "Truly practical privacy features are a key characteristic of CRE orchestration; stay tuned."
Outlook: RWA will eventually surpass cryptocurrency.
Nazarov concluded with a bold prediction: if these trends continue, the total value of on-chain RWA will surpass that of cryptocurrencies, "fundamentally changing the nature of our industry." This shift will also fuel the growth of the cryptocurrency asset class—more capital going on-chain will create a positive cycle—but RWA is the core driving force propelling everything into the mainstream.
I have never been so excited about the potential for our industry to become a better version of the global financial system.
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