Where there’s a shift, there’s also a wave of new innovators riding the change – crypto-native asset managers are leading that charge. These private, public and experimental entities are changing the game in how capital is governed, risks are managed and assets are allocated across blockchain ecosystems. Calloutcoin.com dives into the growing power of onchain asset managers. They evaluate how this trend is changing the DeFi landscape, what it means for retail investors, and more.

The Rise of Onchain Asset Managers

At the same time, crypto asset managers have quadrupled their holdings since January. This is crucial for anyone who manages directly onchain. This surge serves as a strong testament to the growing institutional interest and confidence behind DeFi protocols. Gauntlet, Steakhouse Financial and Re7 control about half the market. Collectively, they account for two-thirds of the total value locked (TVL) in the space, among the largest “crypto-native” asset managers. This consolidation of power serves to underline their enormous sway over the DeFi space. In recent years, the sector has had meteoric growth. Yet it has more than quadrupled its onchain capital base from about $1 billion to over $4 billion since January 2025. This rapid growth is a sign that the market is entering maturity. More than ever, people are adopting on-chain asset management, making it the next go-to investment strategy.

Enabling Institutional DeFi Participation

Onchain asset managers like Gauntlet and Steakhouse Financial are central to enabling institutional participation in DeFi. By doing so, they abstract away the complexities of DeFi protocols, providing institutions with a more accessible and manageable entry point. This is important because most traditional financial institutions do not have the in-house expertise to work through the complexities of DeFi. These asset managers offer customized solutions with clear and comprehensive risk management frameworks. They’re great at bridging the gap between legacy finance and the crypto world.

Responsibilities and Influence in DeFi

Onchain asset managers are an essential piece of the DeFi ecosystem as they govern protocols, manage risk, and allocate capital across protocols. Their role is complex and requires expertise in both conventional finance and Web3.

Governing Protocols

Smart contract vulnerabilities are one of the greatest risks in DeFi, with many projects experiencing catastrophic financial losses. It is imperative that the proper risk management structures and tools exist in order to reduce the inherent risks within DeFi protocols. Ecosystem stability must be considered as well, and liquidity withdrawals can be rapid, ramping at times and destabilizing entire ecosystems. Governance risks are another potential category of risk in DeFi, as the decentralized nature of today’s DeFi sector poses significant challenges to regulatory enforcement. Reducing regulatory and operational risks Compliance features and real-time monitoring were very important (20% each) features to help reduce regulatory and operational risks.

  • Proposing and voting on protocol upgrades: This ensures that the protocols remain secure, efficient, and aligned with the needs of the community.
  • Setting risk parameters: They define the acceptable levels of risk for various DeFi activities, such as lending and borrowing.
  • Managing treasury funds: They oversee the allocation of funds within the protocol's treasury, ensuring that they are used effectively to support the protocol's growth and development.

Managing Risk

Onchain asset managers use a wide range of long, short, liquidity providing and other strategies to deploy capital across the DeFi ecosystem. These strategies include:

Allocating Capital

The emergence of onchain asset managers presents a powerful new tool with both benefits and dangers for retail investors. These real world entities can bring further stability and sophistication to the DeFi market. They raise risks related to information asymmetry and unequal access to opportunity.

  • Organic growth: Growing the investment through internal means, such as increasing the value of existing assets.
  • Mergers and acquisitions: Combining with or acquiring other companies to expand the investment portfolio.
  • Debt payments: Using debt financing to fund investments.
  • Dividend payments: Distributing a portion of the investment returns to investors in the form of dividends.
  • Shares buyback: Buying back shares of the investment to reduce the number of outstanding shares and increase the value of the remaining shares.

Implications for Retail Investors

DeFi’s ostensible lack of transparency serves to establish a two-tier market. In contrast to the superior, outsized returns reaped by professional investors and insiders, the retail investor bears a disproportionate amount of risk, with wider spreads, inferior pricing and less likelihood of long-term fruitful outcomes. Retail investors are disadvantaged due to limited access to information, allowing rich investors and insiders to benefit at their expense. If left unchecked, these bad actors will prey on the most vulnerable among us. This is especially the case where the financial incentives to cheat are significant, and the likelihood of detection or penalties is low.

Information Asymmetry and Unequal Access

Large investors' decisions to deposit in DeFi protocols are less affected by policy rates or US Treasury yields compared to retail investors, potentially creating an uneven playing field. DeFi investors are subject to a much lower degree of compliance and strong disclosure than other regulated markets within the US. Consequently, retail investors are left more susceptible to harms.

It is essential to:

Navigating the Evolving Landscape

Decentralized finance (DeFi) is revolutionizing the way individuals interact with and utilize financial services. It cuts out the middle men and ushers in a new era of transparent, efficient, and inclusive financial systems. The broader DeFi ecosystem is maturing quickly. Onchain asset managers will play an outsized role in determining its future. By understanding their influence and the implications for retail investors, individuals can make more informed decisions and navigate this dynamic landscape with greater confidence.

  1. Educate themselves: Understand the risks and opportunities associated with different DeFi protocols and investment strategies.
  2. Diversify their portfolios: Avoid putting all their eggs in one basket.
  3. Seek professional advice: Consult with financial advisors who have expertise in DeFi.
  4. Stay informed: Keep up-to-date with the latest developments in the DeFi space.

The future of decentralized finance (DeFi) is revolutionizing how people access and manage financial services, removing intermediaries and offering a more transparent, efficient, and inclusive financial system. As the DeFi ecosystem continues to mature, onchain asset managers will play an increasingly important role in shaping its trajectory. By understanding their influence and the implications for retail investors, individuals can make more informed decisions and navigate this dynamic landscape with greater confidence.