Smart Money Flow: Wall Street is疯狂ly plundering on-chain capital, will $BTC $ETH 's victory or downfall?

Institutions are finally here, but don’t misunderstand—they’re not here to be saviors.

Their goal is pure: to turn the crypto economy into fuel for expanding their asset management scale, converting it into stable and lucrative fee cash flows. This is not criticism, just an observation based on facts. My view mainly targets crypto assets as tokens, not the underlying blockchain infrastructure.

Over the past year, this picture has become clearer. Recently, Evgeny from Wintermute and Dean from Markets Inc. wrote articles discussing the so-called “institutional adoption,” which inspired me to add a perspective: the dramatic shift in capital patterns and the fierce competition for AUM.

In a nutshell: “Institutional adoption” is not a mission but a squeezing strategy. The core issue is whether the crypto industry can build its native institutions fast enough to keep economic value on-chain instead of flowing into traditional finance.

Following the flow of funds, it’s obvious who is truly profiting. Not DeFi protocols, but those institutions that Satoshi originally aimed to replace.

Just with $USDT and $USDC, they generate about $10 billion in net interest annually, with profits going to Tether, Coinbase, and Circle. Cantor Fitzgerald earns hundreds of millions of dollars annually by managing government bonds for Tether and arranging trades for digital asset companies.

BlackRock’s $IBIT $BTC ETF grew to about $100 billion in assets under management within roughly 18 months, becoming the fastest-growing ETF in history and BlackRock’s most profitable product. Institutions like Apollo are quietly channeling crypto collateral and treasury funds into their own credit and multi-asset funds.

Every year, traditional financial institutions extract hundreds of billions to over a trillion dollars in assets and profits from the crypto economy—often earning more than the native protocols that create value. Those “innovators” promoting institutional entry and “fighters” hyping meme coins are perhaps more similar than you think.

Companies have only one goal: maximize profits. Crypto can help in two ways: reducing costs and increasing revenue.

Distributed ledgers and on-chain collateral can significantly lower backend costs. Packaging crypto into ETFs, structured products, and custodial services can generate ongoing fee income. Over the past decade, institutions have focused solely on cost reduction. In early 2018, a few bold independent managers who invested in $BTC saw astonishing returns.

Early 2024 marks a turning point. The launch of BlackRock’s $IBIT is the tide that breaks the dam. It proves that crypto can become a massive revenue machine.

Key data: $IBIT reached $70 billion in AUM within a year of launch, with a growth rate about five times that of the previous record holder, gold ETFs like $GLD. After the $IBIT options listed at the end of 2024, attracting over $30 billion, accounting for more than half of the total $BTC ETF size.

With about $100 billion in AUM, $IBIT generates hundreds of millions of dollars in fees annually for BlackRock—more than its nearly trillion-dollar flagship S&P 500 index fund. It sets a standard for the entire industry: put $BTC into traditional fund structures, list it, and turn it into a fee-generating cow.

We also need to pay attention to another trend devouring global capital: the AI capital expenditure supercycle. Building an AI economy requires trillions of dollars, with funds flowing out of all non-AI assets.

The financing cycle is lengthening, and competition for quality AUM channels is fierce. The market is extremely cash-hungry. Any capital pool will be targeted.

In this AUM race, crypto is no longer a toy but a potential target worth trillions of dollars. $IBIT proves it is a “honeypot” for institutional allocators.

Currently, on-chain capital is enormous: total stablecoin issuance is about $300 billion, multi-chain DeFi total lock-up is around $90–100 billion, and real-world assets add hundreds of billions more.

But the average on-chain yield is only 2%–4%, below the roughly 4.1% of traditional money market funds. Even Lido’s nearly $18 billion $stETH pool yields only about 2.3%.

In the eyes of hungry asset managers, this isn’t “DeFi lock-up,” but cash flows that haven’t been fully monetized—ready to be packaged, staked, re-lent, and feeed. It’s the survival instinct of institutions.

Tokenization and compliant packaging turn formerly “forbidden zones” of crypto capital into fee-based AUM within traditional frameworks. When companies and DAOs accumulate huge crypto treasuries and seek external yields, asset managers can repackage these assets.

For companies under capital pressure, “integrating” crypto assets and liabilities is one of the cleanest paths to expanding fee-based AUM.

This warning must be sounded: if you don’t act, you will be absorbed. The crypto economy is bringing in traditional financial institutions that do not share its core values, and the entire industry will pay the price.

If development continues unchecked, the crypto economy will ultimately become just a liquidity appendage for traditional finance’s AUM expansion.

The only way out is to quickly establish and grow our own native institutions: on-chain asset management, native financial products, and crypto-native allocation firms. They can design products that serve the long-term interests of crypto, keeping economic value within the ecosystem.

If we don’t prioritize supporting crypto-native institutions now, so-called “institutional adoption” won’t be victory but absorption. Stand firm, or lose everything.

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