Institutional adoption is, at its core, an extraction strategy; its aim is to convert on-chain assets into asset under management and stable fee flows, not to support native ecosystem development. Traditional finance has emerged as the major winner: USDT and USDC together generate about $1 billion in net interest income annually flowing to Tether, Coinbase, and Circle. BlackRock’s Bitcoin ETF, IBIT, has grown to roughly $100 billion in AUM in about 18 months, becoming one of the industry’s most profitable products. IBIT reached about $70 billion in its first year, at a pace roughly five times faster than the previous record holder GLD; by the end of 2024 its options listing drew more than $30 billion in fresh inflows, pushing its market share to over half of all Bitcoin ETF AUM.
The macro backdrop is equally transformative: an AI-driven capital expenditure supercycle will require trillions of dollars and is drawing liquidity away from other asset classes, intensifying competition for every AUM channel, including crypto. On-chain capital represents the next frontier for AUM, with major pools comprising roughly $3 trillion in stablecoins (about 60% USDT and 25% USDC), $90–$100 billion in DeFi TVL spread across Ethereum, Solana, BSC, and Hyperliquid, and hundreds of billions more in tokenized real-world assets. Yet the on-chain yields average only about 2–4%, far below traditional money markets at around 4.1%, with large staking pools like Lido’s $18 billion stETH yielding roughly 2.3%. These gaps point to unrealized cash flows that can be realized through packaging, staking, re-lending, and fee-tiered products.
Tokenized and regulated wrappers have already begun converting previously untouchable crypto capital into fee-based AUM within robust risk management and custodian frameworks. As corporates, DAOs, and protocols accumulate treasury reserves and seek safer external yields, asset managers can repackage these assets into tokenized funds, money market funds, and structured products. For firms facing funding pressure and channel saturation, raiding their crypto treasuries for fee-based AUM is among the cleanest growth paths. If the industry fails to accelerate its native institutions—on-chain asset management, risk management, acquirers, financial products, and crypto-native asset allocators—the crypto economy risks becoming just another liquidity warehouse for TradFi, and the only escape is to accelerate our own native institutions to steward on-chain growth and cash flows.
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