Crypto Market New Landscape: Insights into Changes in Grayscale Investment Rankings

In the rapidly changing field of encryption, the movements of institutional capital often indicate the future direction of the market. As a pioneer in crypto asset management, Grayscale Investments updates its Top 20 asset list every quarter, which can be regarded as a "treasure map" of the crypto market from an institutional perspective, outlining a deep forecast of the adoption trends for the next stage of the market.

In the third quarter of 2025, this "treasure map" has quietly adjusted: the rising star Avalanche (AVAX) and Morpho (MORPHO) have jumped onto the list, while the former giants Lido DAO (LDO) and Layer 2 star Optimism (OP) have unfortunately exited. What changes in the crypto market does this ebb and flow reveal? Let's delve deeper to uncover the new narrative of crypto investment in 2025.

Signals of Structural Change

Avalanche (AVAX): The strong pulse of on-chain activity

Avalanche depicts a scalable and customizable blockchain future. Its unique "Avalanche consensus mechanism" achieves high throughput, low latency, and decentralization, while the tri-chain architecture ensures sub-second transaction finality, laying the groundwork for large-scale applications.

In 2025, the transaction volume of Avalanche's C-Chain surged 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 accurately captures the demand for GameFi and enterprise-level applications, with games like MapleStory Universe launching on its subnet. It also actively embraces the traditional world, collaborating with several Web2 giants to promote the tokenization of real-world assets, marking a key step for the Web3 economy to penetrate the mainstream.

Grayscale is optimistic about Avalanche, stemming from its technological advancements, strategic ecosystem expansion, and the "multi-dimensional growth flywheel" formed by the integration with Web2. This indicates that the competition for Layer 1 is shifting towards a broader new track with real economic activities and the potential for integration between Web2 and Web3.

Morpho (MORPHO): "Transformers" style decentralized lending

Morpho is paving a new institutional path for decentralized lending. As a DeFi lending protocol based on Ethereum and Base chains, it optimizes yields and ensures security through "Morpho Vaults" and isolated markets. Its protocol design focuses on low transaction fees and has undergone multiple rigorous audits.

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

More significantly, a large 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 adoption cases in 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 deeply 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.

Farewell to the Old Generals: Goodbye to Lido and Optimism

Lido DAO (LDO): The "liquid staking empire" 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 lies concerns about its centralization risks: the "permissioned" validator set, the control of core permissions by the LDO token, and the incident in May 2025 where a validating node's hot wallet was compromised, all of which have sounded alarm bells.

In April 2023, the Ethereum Shanghai upgrade allowed for the withdrawal of ETH, weakening Lido's "moat" in terms of liquidity. Users now have more options, turning to centralized platforms or emerging non-custodial competitors. The innovation of re-staking has also intensified the 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 regulations. Grayscale may believe that its risk-reward ratio is no longer attractive. Lido's exit signifies that institutional investors are raising their evaluation standards for 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 leading Ethereum Layer 2 scaling solution, Optimism bears the important responsibility of enhancing transaction capacity, reducing Gas fees, and improving user experience. Its "Superchain" vision, powered by the OP Stack, has attracted several star projects. However, in terms of TVL and activity, it still somewhat regrettably lags behind its competitors.

OP tokens are the core of the Optimism Collective's decentralized governance structure. However, there is a "myth" regarding its revenue distribution model: currently, the revenue from sequencers goes 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 tokens, leaving institutional investors with doubts.

In addition, the governance of Optimism is not without its challenges. Low voter participation and the significant control that core contributors and early investors have over the voting process indicate that the commitment to "decentralization" still has room for improvement in practice.

The removal of Optimism reflects a profound skepticism from Grayscale regarding 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 core team's concentration of voting power also add complexity and risk for 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. The exit of Optimism signifies a deepening institutional assessment of Layer 2 token economics: mere technological leadership is insufficient to support long-term value; tokens must possess clear, sustainable value capture mechanisms and genuine decentralized governance.

The "Barometer" and "Structural Change" of Crypto Investment in 2025

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

In the first quarter of 2025, institutional interest in digital assets continues to rise. Surveys show that up to 86% of institutional investors surveyed have held or plan to allocate digital assets, with nearly 60% planning to invest more than 5% of AUM in crypto. The successive approvals of Bitcoin and Ethereum ETFs are like opening the door to cryptocurrencies in the mainstream financial world, and a well-known asset management company's Bitcoin ETF even set the record for the fastest growth in history.

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

Institutional investment is moving from a simple "Bitcoin faith" to 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 "Wild Growth" to "Refined Survival"

In 2024, the total value locked (TVL) in DeFi surged by 129%, and the trading volume of decentralized exchanges (DEXs) skyrocketed by 872%. DeFi is developing yield-generating 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 innovation in DeFi lending.

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-generating stablecoins and embedded finance enrich product forms, seamlessly connecting 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 a recognition of the trend of DeFi's "self-evolution and external integration", looking favorably on protocols that can enhance efficiency, reduce risk, and connect with 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 and ZK-Rollups are mainstream technologies. The Layer 2 market is highly competitive, with a well-known project currently maintaining its lead in TVL and the number of protocols. Optimism, through its "super chain" vision and OP Stack, is committed to building an interoperable ecosystem, attracting multiple heavyweight projects.

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

Regulatory "filter": Compliance, institutional funds' "ticket to entry"

In 2025, the regulatory environment for cryptocurrencies in the United States gradually became clear, acting like a "filter" for institutional funds entering the crypto market. Regulatory agencies issued new guidelines, clarifying that "protocol staking" is not considered a securities issuance. The U.S. Congress passed a bill that abolished the reporting obligations for brokers related to DeFi platforms (non-traditional fiat currency deposits and withdrawals).

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

Conclusion

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

The core investment logic of the crypto market in 2025 can be summarized as follows: focus on application-driven Layer 1/Layer 2, emphasize institutional-grade DeFi infrastructure, highlight clear value capture and decentralized governance, and prioritize compliance.

For participants in the encryption world, the Grayscale leaderboard provides valuable strategic guidance. Investors should go beyond short-term speculation and delve into project fundamentals, technological innovations, ecosystems, token economics, and compliance. Project builders, on the other hand, need to build healthy and sustainable economic models while achieving technological breakthroughs, strengthen decentralized governance, and actively integrate with the traditional financial world to seize opportunities for institutional funds. In 2025, the crypto market is transitioning from "barbaric growth" to "refined cultivation" and understanding.