Tokenized U.S. Treasuries TVL plummets 7% as yield curve inversion and regulatory pressures drive $800M weekly drop

The tokenized U.S. Treasury market, which had drawn over $10 billion in assets during its peak, has seen a dramatic reversal as total value locked (TVL) plummeted by $800 million in a single week as of July 10, 2025. This sharp decline, representing a 7% drop in TVL, signals a waning of speculative interest in tokenized Treasuries, which were once hailed as a bridge between traditional finance and decentralized markets [1]. The correction reflects broader market fatigue, with liquidity providers and institutional investors withdrawing capital as tokenized assets failed to outperform alternatives in a volatile summer trading environment.

The underperformance is linked to persistent macroeconomic headwinds, including an inverted U.S. Treasury yield curve that has reduced the appeal of fixed-income instruments. Long-term rates remain below short-term benchmarks, diminishing the relative value of tokenized Treasuries that mirror conventional bond returns. Compounding these challenges, regulatory scrutiny over stablecoins and tokenized assets has intensified, with U.S. officials hinting at stricter oversight for tokenized securities. These factors have created a risk-averse atmosphere, deterring speculative inflows into the space.

While the $800 million drop raises questions about the sustainability of demand, it does not signal a collapse of the tokenization sector as a whole. Other asset classes, such as tokenized real estate and corporate bonds, continue to grow steadily, indicating the decline is asset-specific rather than a systemic issue. However, the correction highlights the sector’s struggle to establish scalable valuation models and regulatory clarity. Analysts note that the market is currently in a holding pattern, with investors awaiting policy developments and macroeconomic stability to reignite interest.

The trajectory of tokenized Treasuries remains closely tied to broader economic trends and regulatory outcomes. Without a clear resolution on oversight frameworks or a shift in yield dynamics, the segment may continue to face pressure from capital reallocations. For now, the market’s pause underscores the fragile balance between innovation and practicality in the tokenization space.

Source: [1] [Tokenized Treasury Frenzy Fizzles With Stunning $800M Weekly Drop] [https://news.bitcoin.com/tokenized-treasury-frenzy-fizzles-with-stunning-800m-weekly-drop/]