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 have finally “entered the crypto space”—but they’re not here to buy your positions. They aim 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 financial infrastructure (the latter generally does not require native tokens, as demonstrated by the architecture of most current DeFi governance tokens).

This is a view I’ve held since last year’s Digital Assets Summit, when my opening speech was titled “Believe in Something.” Nothing that has happened 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 changing capital landscape and the exploding AUM war.

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 is: can crypto build and fund its own institutions fast enough to keep economic value on-chain, rather than letting it flow continuously into TradFi hands?

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

Just following the flow of capital 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 own shareholders.

Cantor Fitzgerald—led by U.S. Secretary of Commerce Howard Lutnick—earns hundreds of millions of dollars 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 also profited billions through expanding crypto projects and token tools.

BlackRock’s Bitcoin ETF IBIT rapidly grew to about $100 billion in AUM within 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 extract 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.

Those “institutional innovators” cheering for “adoption” at countless conferences and the warhorses tweeting about memecoins 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. Cryptocurrency 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, improving 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, treasury management solutions—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 promoting the advantages of Bitcoin’s global ledger and final settlement mechanisms to nearly all financial institutions. At that time, financial service companies 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 take on 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 fund managers willing to embrace Bitcoin—like Cathie Wood, Murray Stahl, Ross Stevens—ultimately reaped substantial rewards for their courage.

2024 marked a turning point. Institutions began treating crypto as a second revenue stream: a new source of income.

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 in 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 the launch of IBIT options, it attracted over $30 billion in new inflows, while competitors’ funds stagnated, giving IBIT more than half of all Bitcoin ETF AUM.

Currently, IBIT’s approximately $100 billion AUM generates hundreds of millions of dollars in annual fees for BlackRock, with profitability even surpassing that of its nearly $1 trillion S&P 500 index fund.

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 supercycle of capital expenditure: a black hole devouring capital

From a different angle, here’s another major trend—also the reason we at Crucible immediately launched 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 are seen as “must-have” AI assets.

Meanwhile, many LPs are over-allocated in private markets, with slower exits and dividends, quietly reducing 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 of 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 explicitly signaled a very lax environment for crypto innovation.

Currently, on-chain asset management and treasury scales have reached hundreds of billions:

Approximately $300 billion in stablecoins, with about 60% USDT and 25% USDC;

DeFi total value locked (TVL) around $90–100 billion, spread 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)—add several hundred billion 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 realized—ready to be packaged, staked, re-lent, and charged fees. For 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 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 suffer the same social and economic repercussions.

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 strengthening 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 do not prioritize collaborating with native crypto institutions now, “institutional adoption” will not be a victory but an absorption.

Believe in something. Otherwise, we will have nothing left.