Institutions are not here to contribute positively, but to drain Crypto's blood.

Author | Meltem Demirors

Translation | Odaily Planet Daily (@OdailyChina)

Translator | Dingdang (@XiaMiPP)

Institutions are finally “entering crypto”—but they’re not here to buy your bags. They’re here to turn the crypto economy into a fee-generating machine for their AUM (Assets Under Management) accumulation. This is not judgment or criticism, just an observation of the facts.

The following thoughts mainly focus on the crypto economy as digital currencies/tokens, rather than blockchain as purely a financial infrastructure (the latter generally does not require native tokens, as proven by the architecture of most current DeFi governance tokens).

This has been my view since last year’s Digital Assets Summit, where my opening speech was titled “Believe in Something.” Nothing that has happened in the past twelve months has changed my perspective—only made the picture clearer.

Recently, my friends Evgeny from Wintermute and Dean from Markets Inc wrote two excellent articles discussing what “institutional adoption of crypto” really means and its impact on market cycles. This inspired me to write a third piece, adding a new perspective based on their insights—the changing capital landscape and the exploding AUM wars.

If you’re short on time, here’s a quick summary:

“Institutional adoption” is not a mission; it’s a strategy of extraction. The real question boils down to: Can crypto build and fund its own institutions fast enough to keep economic value on-chain, rather than letting it flow continuously into TradFi?

Traditional finance has already been extracting most of the value from the crypto economy

Just following the flow of funds reveals who the real winners are in today’s crypto world: not DeFi protocols, but those financial companies that Satoshi Nakamoto originally aimed to replace in the Bitcoin whitepaper.

• Just USDT and USDC stablecoins generate about $10 billion in net interest annually, belonging to Tether (private company), Coinbase, and Circle (public companies). These companies are important players in the crypto economy, but their primary clients are their shareholders.
• Cantor Fitzgerald—led by current U.S. Secretary of Commerce Howard Lutnick—earns hundreds of millions annually by holding U.S. Treasuries for Tether and organizing trading around digital asset firms and investment products.
• U.S. President Trump, his family, and partners have collectively profited billions through expanding crypto projects and token tools.
• BlackRock’s Bitcoin ETF IBIT grew rapidly to about $100 billion AUM in roughly 18 months, becoming the fastest-growing ETF in history and one of the firm’s most profitable products (more details later).
• Apollo Global Management and its peers quietly channel crypto collateral and corporate treasury balances into their credit and multi-asset funds.

Every year, traditional financial institutions siphon off billions of dollars in assets and profits from the crypto economy—and in many cases, their economic upside exceeds that of the protocols that originally created the value.

The “institutional innovators” cheering for “adoption” at countless conferences and the war-hardened memecoin chatter on Twitter are actually more similar than you think. It’s time to stop licking and start thinking.

How do institutions really think?

Companies have only one core function: maximize profits. Crypto can achieve this in two ways:

• Cost side: Distributed ledgers, on-chain collateral, real-time settlement—significantly reduce back-end and middle-office operational costs, improve collateral liquidity and utilization (see my previous notes on interchangeable liquidity).
• Revenue side: Wrap crypto into ETFs, tokenized funds, structured products, custody services, basis trading packages, lending, sovereign bond management… all generating hefty fee streams, plus the hype from the crypto community on Twitter.

Over the past decade, institutions mainly focused on the first approach.

When we founded DCG in 2015, I spent three years promoting the advantages of Bitcoin’s global ledger and final settlement mechanisms to nearly all financial institutions. Back then, financial service firms didn’t see crypto as a new revenue source. It was considered too risky; the potential gains from shilling altcoins weren’t enough to persuade boards to accept reputational and compliance risks.

After leaving DCG, I joined CoinShares in early 2018. The firm’s AUM grew from tens of millions to billions of dollars. A few independent managers brave enough to embrace Bitcoin—like Cathie Wood, Murray Stahl, Ross Stevens—ultimately reaped substantial rewards for their courage.

2024 marked a turning point. Institutions began to treat crypto as a second revenue stream: new income sources.

Although some institutions had participated sporadically before, the launch of BlackRock’s IBIT Bitcoin ETF broke the dam. IBIT became the most successful ETF ever, significantly boosting BlackRock’s earnings. Key figures:

• IBIT reached $70 billion AUM in its first year, becoming the fastest ETF to hit that scale—about five times faster than the previous record holder, SPDR Gold Shares (GLD).
• By the end of 2024, after IBIT options launched, it attracted over $30 billion in new inflows, while competitors’ funds stagnated, giving it more than half of all Bitcoin ETF AUM.
• Currently, IBIT’s roughly $100 billion AUM generates hundreds of millions annually in fees, even surpassing the profitability of BlackRock’s nearly $1 trillion S&P 500 index funds.

The conclusion is clear: IBIT has set a standard script for all large asset managers and financial service firms—take Bitcoin or other digital assets → package into traditional fund structures → list → turn into a steady, lucrative fee stream. Everything that follows—DATs, tokenized bonds, on-chain money market funds—is just running this script repeatedly.

AI Capital Expenditure Supercycle: a Black Hole Devouring Capital

Looking at another big trend—this is also why we at Crucible launched immediately after IBIT in 2024. The Energy-Compute Value Chain is reshaping the global capital stack in real time.

Building an AI economy—chips, data centers, power, factories—will require trillions of dollars in capital over the next decade, and that money has to come from somewhere. All liquidity assets not directly tied to AI—crypto, non-AI stocks, even credit assets—are being sold off to chase what’s seen as “must-have” AI assets.

Meanwhile, many LPs are over-allocated in private markets, with slower exits and dividends, quietly cutting or delaying new private credit and PE commitments. This leads to longer, more uneven, and less predictable fundraising cycles, intensifying competition among asset managers and PE firms for quality AUM channels. The result: all seemingly capital pools are being drained.

On-Chain Capital: The Next Frontier for AUM

In this AUM war, crypto is no longer a niche toy but a potential management scale of trillions of dollars, plainly in front of us.

IBIT has proven that crypto is both a money printer and a “honey pot” for institutional allocators. The Trump administration has also explicitly signaled a very lax environment for crypto innovation.

Currently, on-chain asset management and treasuries total hundreds of billions of dollars:

• About $300 billion in stablecoins, with roughly 60% USDT and 25% USDC;
• DeFi total value locked (TVL) around $90–100 billion across chains like Ethereum, Solana, BSC, Hyperliquid;
• Real-world asset (RWA) products—via tokenized money funds (e.g., BlackRock’s BUIDL), tokenized gold (e.g., Tether Gold, PAXG), and consumer credit products (e.g., Figure’s tokenized HELOC)—adding hundreds of billions more.

However, the average yield on these on-chain assets is only 2–4%, while traditional money market funds offer around 4.1%, and even Lido’s $18 billion stETH pool yields about 2.3%.

For a hungry asset accumulation machine, this isn’t “DeFi TVL,” it’s cash flow that’s not fully monetized—ready to be packaged, staked, re-lent, and charged fees. To institutions, it’s as natural as breathing.

Image from DefiLlama

Tokenized and regulated wrapper products have turned previously “untouchable” crypto capital into fee-generating AUM that complies with existing custody and risk frameworks. When companies, DAOs, and protocols accumulate large amounts of crypto bonds and seek safer external yields, asset managers can repackage these into tokenized funds, money market funds, structured products. For firms facing fundraising pressure and saturated traditional channels, “raiding” crypto balance sheets is one of the cleanest paths to grow fee-based AUM.

A Wake-Up Call

Just as Western economies have introduced groups that do not share their cultural and value systems, and are now facing social and economic consequences, crypto is on a similar survival crisis edge. The crypto economy and its leading thinkers are bringing in financial institutions that do not share our values. These institutions are not here to co-build native economic growth; our industry will soon taste the same social and economic bitter fruits.

If development is left unchecked, the crypto economy will become just another liquidity silo for traditional finance’s AUM machine. The only way out is to accelerate building and expanding our own native institutions—on-chain asset management, risk management, underwriters, financial products, native crypto allocators—to compete for bond AUM, design products that truly serve long-term crypto interests, and keep more economic value inside the crypto ecosystem rather than flowing out to corporate profits.

If we don’t prioritize collaborating with native crypto institutions now, “institutional adoption” won’t be a victory—it will be an acquisition.

Believe in something. Otherwise, we’ll have nothing left.