In 2025, the crypto world was sold a compelling narrative: institutional money is finally flowing into digital assets, bringing legitimacy, liquidity, and the long-awaited bull market. Big players were supposed to be entering the market — traditional finance (TradFi) institutions eagerly allocating capital into Bitcoin, altcoins, and DeFi. But if you step back and look at what actually happened, the story is very different.
Bitcoin ETFs Took Center Stage — But That Was the Only Real Institutional Story
There’s no denying that 2025 saw significant capital flows into Bitcoin, especially through U.S. spot Bitcoin ETFs. These products logged steady inflows throughout the year, with some weeks seeing billions of dollars poured into Bitcoin exposure. But this doesn’t tell the whole story — it only tells the Bitcoin part of it. �
ChainCatcher
The broader institutional thesis was much wider: investors were expected to diversify not just into Bitcoin, but into altcoins, decentralized finance (DeFi) protocols, and other Web3 innovations. Instead, what happened was much narrower.
Zero Traditional Finance Capital Into Altcoins & DeFi?
According to Kyle Reidhead — co-owner and Head of Research at Milk Road — the narrative of institutional entry was overblown. In his analysis, TradFi money didn’t meaningfully flow into altcoins or DeFi products in 2025. Instead:
Institutions concentrated on safe, regulated products like Bitcoin ETFs.
TradFi players largely ignored the more speculative corners of the crypto market.
Where capital did flow, it was often retail-driven or through crypto-native funds, not traditional Wall Street allocators.
Kyle argues that investors were sold a half-truth: Bitcoin might attract institutional interest, but the rest of crypto was left behind, and that’s where the exciting potential lies. �
milkroad.com
Why Did This Happen?
There are a few key reasons behind this disconnect:
1. Regulatory Comfort = Bitcoin Only
Institutional investors overwhelmingly prefer regulated, transparent products. Spot Bitcoin ETFs ticks these boxes. But altcoins and DeFi — with murkier regulatory oversight — remain much harder to justify in institutional portfolios.
2. Risk Management & Internal Constraints
Large allocators live and die by risk mandates. Bitcoin’s narrative as digital gold made it easier to slot into portfolios. Altcoins and DeFi products — even with strong fundamentals — often fail traditional risk models.
3. Slow Infrastructure & Custody Solutions
DeFi protocols lack the same level of institutional custody, audit standards, and compliance infrastructure that big investors require. TradFi enters markets through regulated, safe channels — not open DeFi protocols.
What Changed in 2025 — And What Didn’t
Yes, there was real capital entering crypto in 2025, but it was far narrower than advertised:
✔️ Bitcoin ETF inflows — real institutional interest. �
❌ Major traditional money into altcoins — none significant. �
❌ TradFi DeFi allocations — essentially zero.
ChainCatcher
milkroad.com
This doesn’t mean institutional money hates crypto — it just means the narrative around broad-based inflows was misleading.
So Were We Really “Sold a Lie”?
In a sense — yes. The industry got wrapped up in the promise that institutional capital would instantly transform every corner of crypto. Instead, what we saw was:
A focus on stored value (Bitcoin).
Slow or negligible institutional adoption of riskier crypto sectors like DeFi and altcoins.
A market where retail and crypto-native players still hold most of the action.
Kyle Reidhead’s point isn’t that institutions won’t ever enter these areas — just that the 2025 narrative overstated what really happened. The myth of institutional floodgates opening across the entire crypto market simply didn’t materialize. �
milkroad.com
What This Means Going Forward
If institutions are eventually going to allocate significant capital to altcoins and DeFi, the market will need:
✅ Clear regulatory frameworks
✅ Mature custody and risk infrastructure
✅ Products that fit institutional risk profiles
Until then, the broader crypto ecosystem will continue to rely largely on retail and crypto-native capital — not the TradFi money many hoped would arrive in 2025.
