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

Author | Meltem Demirors

Compiled by | 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 that grows their AUM (Assets Under Management). This is not judgment or criticism, just an observation of the facts.

The following thoughts mainly focus on crypto as an economy of digital currencies/tokens, rather than blockchain as pure infrastructure (the latter generally doesn’t require native tokens, as proven by most current DeFi governance token architectures).

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

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 shifting capital landscape and the exploding AUM war.

If you’re short on time, here’s the key takeaway:

“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 follow the flow of funds, and you’ll see who the real winners are in today’s crypto world: not DeFi protocols, but the 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 own 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 rapidly grew 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 on this later).
• Apollo Global Management and 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 value.

The “institutional innovators” cheering for “adoption” at countless conferences and the battlefield memecoin chatter on Twitter are actually more alike 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 reducing back-end and middle-office operational costs, increasing collateral liquidity and utilization (see my previous notes on interchangeable liquidity).
• Revenue side: Packaging crypto into ETFs, tokenized funds, structured products, custody services, basis trading packages, lending, sovereign bond management… all generating hefty fee streams, plus the hype on Twitter.

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

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

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

2024 marked a turning point. Institutions began treating 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, making it 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 options listing, IBIT 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—buy Bitcoin or other digital assets → package into traditional fund structures → list → generate stable, hefty fee streams. Everything that follows—DATs, tokenized treasuries, on-chain money market funds—is just running this script repeatedly.

AI super-cycle of capital expenditure: a black hole devouring capital

From a different angle, here’s another major trend—also the reason why 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” attracting institutional allocators. The Trump administration has also signaled a very lax environment for crypto innovation.

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

• 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 unexploited cash flow—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 treasuries and seek safer external yields, asset managers can repackage these assets into tokenized funds, money market funds, and structured products. For firms facing fundraising pressures 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 are now experiencing social and economic consequences from groups that do not share their culture and values, crypto is on the brink of a similar survival crisis. 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; soon, our industry will suffer the same social and economic repercussions.

If 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 treasury 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.