Institutional Perspective on the Crypto Market: Grayscale List Adjustments Reveal Investment Trends for 2025

In the rapidly changing world of encryption, the movements of institutional capital are often key clues to insight into the future. As a pioneer in the field of crypto asset management, Grayscale Investments' quarterly updated Top 20 asset list serves as a "treasure map" of the crypto market from an institutional perspective, outlining a deep forecast of the "actual adoption trends" for the next phase of the market.

In the third quarter of 2025, Grayscale's "treasure map" quietly adjusted: the rising star Avalanche(AVAX) and Morpho(MORPHO) jumped onto the list, while the former giants Lido DAO(LDO) and Layer 2 hope star Optimism(OP) unfortunately exited. Between the entry and exit, what changes in trends are hidden in the crypto market? Let us delve deeper and uncover the new narrative of crypto investment in 2025 behind this seemingly ordinary list change.

Signals of Structural Reform

Avalanche(AVAX): The strong pulse of the "heartbeat" on-chain.

Avalanche depicts a scalable and customizable blockchain future. Its "Avalanche consensus mechanism" achieves high throughput, low latency, and decentralization. The three-chain architecture (X-Chain, C-Chain, P-Chain ) ensures sub-second transaction finality, laying the foundation for large-scale applications.

In 2025, the trading volume of Avalanche's C-Chain skyrocketed from 250,000 to nearly 1.2 million, thanks to the Etna upgrade, which reduced average transaction fees by over 90%, greatly stimulating on-chain vitality.

Avalanche precisely captures the needs of GameFi and enterprise-level applications, with games like MapleStory Universe launching on subnet (Subnets). It also actively embraces the traditional world, collaborating with several Web2 giants to promote the tokenization of real-world assets, which is a key step for the Web3 economy to penetrate the mainstream.

Grayscale is optimistic about Avalanche due to its technological advancements, strategic ecosystem expansion, and the formation of a "multidimensional growth flywheel" through integration with Web2. This indicates that Layer 1 competition is shifting towards a broader new track with real economic activity and the potential for integration between Web2 and Web3.

Morpho(MORPHO): "Transformers"-style decentralized lending

Morpho is charting a new institutional path for decentralized lending. It is a DeFi lending protocol based on Ethereum and Base chains, optimizing yields and ensuring security through "Morpho Vaults" and isolated markets. The protocol design emphasizes low transaction fees and has undergone over 25 audits.

Morpho has achieved remarkable results: annual fee revenue has reached $100 million, total locked value (TVL) has doubled to over $4 billion, firmly securing the second position in DeFi lending. On the Base chain, it is the largest protocol in terms of TVL and active loan volume. Top venture capital has invested over $69 million.

More significantly, a certain trading platform has integrated Morpho into its main application, allowing users to borrow USDC by collateralizing with Bitcoin, which is one of the largest institutional-level adoption cases of DeFi to date. The release of Morpho V2 further signifies the determination to bring DeFi into traditional financial institutions.

The rise of Morpho validates its potential as a "DeFi institutionalization engine." It understands the requirements of institutions for risk management and compliance, addressing the pain points of traditional finance entering DeFi through refined market design and support for permissioned markets. Grayscale favors it precisely because of its ability to enhance DeFi efficiency, reduce risk, and effectively connect with traditional finance.

The Departure of the Old Guard: Farewell to Lido and Optimism

Lido DAO(LDO): The "Empire" of liquid staking faces headwinds.

Lido DAO was once the undisputed "empire" giant in the Ethereum liquid staking space, managing about 33% of staked ETH. However, behind this success are concerns about its centralization risks: the "permissioned" validator pool, the control of core permissions by the LDO token, and the May 2025 breach of the Chorus One hot wallet have all raised alarms.

In April 2023, the Ethereum Shanghai upgrade allowed for ETH withdrawals, weakening Lido's "moat" in terms of liquidity. Users have more options, turning to centralized platforms or emerging non-custodial competitors. Innovations in re-staking, such as EigenLayer, have also intensified competition.

Lido's removal is a reflection of Grayscale's reassessment of "centralization risk." After the Shanghai upgrade, Lido's "centralization" characteristics have become more pronounced against the backdrop of intensified competition and clearer regulation. Grayscale may believe that its risk-reward ratio is no longer attractive. Lido's exit marks an elevation in the evaluation criteria of institutional investors regarding liquid staking, placing greater emphasis on decentralization, governance transparency, and potential regulatory risks.

Optimism(OP): The grand vision of Layer 2, trapped in the "myth" of value capture.

As a leader in Ethereum Layer 2 scaling solutions, Optimism bears the responsibility of enhancing transaction capacity, reducing Gas fees, and improving user experience. Its "superchain" (Superchain) vision has attracted star projects through the OP Stack. However, in terms of TVL and activity, it still somewhat regrettably lags behind its competitor Arbitrum.

The OP token is at the core of the Optimism Collective's decentralized governance structure. However, its revenue distribution model has a "myth": currently, the income from sequencers is allocated to the Optimism Foundation to fund public goods, rather than being directly distributed to OP token holders. Although there is hope for sharing in the future, this uncertainty affects the direct value capture of the token, leaving institutional investors with doubts.

In addition, Optimism governance has not been smooth sailing. The low voter participation and the significant control over the voting process by core contributors and early investors indicate that the commitment to "decentralization" still has room for improvement in practice.

The removal of Optimism reflects a profound questioning by Grayscale of its OP token's "value capture mechanism." A grand ecological vision does not directly translate into a clear value for the token. Institutional investors tend to prefer clear and direct paths for token value capture. Low governance participation and the concentration of voting rights within the core team also increase the complexity and risks associated with institutional investment. In the face of fierce competition in the Layer 2 space, Grayscale may believe that OP will struggle to provide "more attractive risk-adjusted returns" in the short term. Optimism's exit reflects an deepening institutional evaluation of Layer 2 token economics: mere technological leadership is insufficient to support long-term value; tokens must possess clear, sustainable value capture mechanisms and true decentralized governance.

Behind the Grayscale Rankings: The "Barometer" and "Structural Changes" of Crypto Investments in 2025

The "tide" of institutional funds: from Bitcoin to the vast deep sea of diversified applications

In the first quarter of 2025, institutional interest in digital assets continues to soar. Surveys show that as many as 86% of interviewed institutional investors have held or plan to allocate digital assets, with nearly 60% planning to invest more than 5% of AUM in encryption. The successive approval of Bitcoin and Ethereum ETFs has opened the doors of the mainstream financial world to encryption, and a Bitcoin ETF from a certain asset management company has even set the record for the fastest growth in history.

This tide has long surpassed the two "islands" of Bitcoin and Ethereum. Data shows that 73% of investors already hold alternative encryption currencies, and participation in DeFi is expected to triple within two years. The tokenization of real-world assets (RWA) and the adoption of stablecoins are accelerating, reaching a total market value of $234 billion, with multiple protocols connecting DeFi and traditional finance.

Institutional investment is moving from a pure "Bitcoin faith" towards a broad ocean of "diversified allocation" and "application scenario landing." The inclusion of Avalanche and Morpho in the Grayscale list is a profound reflection of the trend of institutional investment "from point to surface" and "from speculation to application."

( The "Evolution of DeFi": From "Barbaric Growth" to "Refined Survival"

In 2024, the total locked value in DeFi surged by 129%, reaching ) TVL ###, while the trading volume of decentralized exchanges (DEXs) soared by 872%. DeFi is developing yield-bearing stablecoins, attracting traditional finance. Trends such as embedded finance, automation, and artificial intelligence/machine learning (AI/ML) are reshaping the landscape. The success of Morpho is a microcosm of DeFi lending innovation.

DeFi is undergoing an "evolution" from "wild growth" to "refined survival." Layer 2 and AI/ML applications aim to address pain points and enhance efficiency. Yield-bearing stablecoins and embedded finance enrich product forms and seamlessly connect with traditional finance. The explosive growth of derivative DEXs and Morpho's institutional pathway indicate that DeFi is meeting the complex trading and risk management needs of institutions. Grayscale's favor towards Morpho is an acknowledgment of the trend of DeFi's "self-evolution and external integration," with optimism for protocols that can enhance efficiency, reduce risk, and connect traditional finance.

( Layer 2's "race": a comprehensive competition of ecology, technology, and value capture

Layer 2 solutions, like Ethereum's "highway", significantly enhance its scalability and reduce user costs. Optimistic Rollups) such as Optimism, Arbitrum(, and ZK-Rollups are mainstream technologies. The Layer 2 market is highly competitive, with Arbitrum currently leading in TVL and the number of protocols. Optimism is committed to building an interoperable ecosystem through its "superchain" vision and OP Stack, attracting heavyweight projects.

The competition for Layer 2 has shifted to a comprehensive contest of "ecosystem building capabilities" and "token value capture models." The removal of Optimism precisely illustrates that even with grand ecological visions, if the token value capture mechanisms are not clear enough or there are risks of centralization, it will be difficult to gain long-term favor from institutions. Grayscale's assessment of Layer 2 has gone beyond superficial indicators, delving into the mechanisms of long-term sustainable value creation and distribution.

) The "filter" of regulation: compliance, the "ticket" for institutional funds to enter.

In 2025, the regulatory environment for cryptocurrencies in the United States gradually becomes clearer, acting like a "filter" for institutional funds entering the crypto market. The U.S. Securities and Exchange Commission ( SEC ) releases new guidelines, clarifying that "protocol staking" is not a securities offering. The U.S. Congress passes a bill that abolishes the IRS ### broker reporting obligations for non-traditional fiat currency deposits and withdrawals on DeFi platforms (.

Regulatory clarity is a key "catalyst" for institutional large-scale entry into the crypto market, while also serving as a precise "filter." It reduces the legal and operational risks for institutions and encourages more compliant entities to enter the PoS ecosystem and DeFi. However, clearer regulations also mean stricter compliance requirements. Lido's removal may be partly due to concerns over its "permissioned" nature and governance centralization. Grayscale, as a strictly regulated asset management company, places a high emphasis on compliance in its investment decisions. This indicates that from 2025 onwards, compliance has upgraded to become the "ticket" for attracting institutional capital.

Conclusion

The adjustment of Grayscale's Top 20 assets list clearly outlines the evolution path of institutional investment in the crypto market for 2025. It focuses on technological innovation, real application scenarios, sustainable value capture models, and decentralized governance practices of projects. The inclusion of Avalanche and Morpho represents the market's recognition of the explosive potential of high-performance public chains in GameFi/enterprise-level applications, as well as the expectation for the development of DeFi lending towards institutional-grade and compliance. The exclusion of Lido DAO and Optimism warns of the centralized risks of liquid staking and the impact of uncertainty in value capture within Layer 2 token economic models on institutional attractiveness.

Summary of the core investment logic for the crypto market in 2025:

• Application-driven Layer 1/Layer 2: The future belongs to public chains and scalability solutions that can attract a large number of users and enterprise-level applications through technological innovation.
• Institutional-grade DeFi infrastructure: The market favors DeFi protocols that can address pain points in traditional finance and connect the on-chain and off-chain worlds.
• Clear value capture and decentralized governance: Tokens need to have a clear, sustainable value capture mechanism and effective decentralized governance.