Interpreting New Trends in Cryptocurrency Investment for 2025 from Grayscale List Changes

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 encryption asset management, a well-known investment company updates its Top 20 asset list every quarter, which can be regarded as a "treasure map" of the encryption market from an institutional perspective, reflecting a deep forecast of the "factual adoption trend" in the next phase of the market.

In the third quarter of 2025, this "treasure map" has quietly adjusted: the rising star Avalanche (AVAX) and Morpho (MORPHO) have made their appearance, while former giants Lido DAO (LDO) and Layer 2 star Optimism (OP) have regrettably exited the stage. What changes in market trends are hidden behind this seemingly ordinary list of changes? Let's delve into the new narrative of cryptocurrency investment in 2025.

Signals of Structural Change

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

Avalanche depicts a scalable and customizable blockchain future. Its unique consensus mechanism achieves high throughput, low latency, and decentralization, while the three-chain architecture ensures sub-second transaction finality, laying the foundation 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 technological upgrades that reduced average transaction fees by over 90%, greatly stimulating on-chain activity.

Avalanche accurately captures the demand for GameFi and enterprise-level applications, with multiple games launching on its 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.

Institutions are optimistic about Avalanche due to its technological advancements, strategic ecosystem expansion, and the "multi-dimensional growth flywheel" formed by its integration with Web2. This indicates that the competition in 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 charting a new institutional path for decentralized lending. It is a DeFi lending protocol based on Ethereum and Base chain, optimizing yield and ensuring security through "Morpho Vaults" and isolated markets. Its protocol design focuses on low transaction fees and has undergone multiple audits.

Morpho has achieved remarkable results: annual fee revenue has reached $100 million, and the total value locked (TVL) has doubled to over $4 billion, 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. Several top venture capital firms have invested over $69 million.

More significantly, a well-known trading platform has integrated Morpho into its main application, allowing users to borrow USDC by collateralizing Bitcoin, marking one of the largest institutional-level adoption cases of DeFi to date. The release of Morpho V2 further demonstrates the commitment to bringing 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 licensed markets. Institutions favor it because they are optimistic about its ability to enhance DeFi efficiency, reduce risk, and effectively connect with traditional finance.

Farewell to the Old Generals: A Goodbye to Lido and Optimism

Lido DAO (LDO): The liquidity staking "Empire" faces headwinds

Lido DAO was once the undisputed "empire" giant in the field of Ethereum liquid staking, managing about 33% of staked ETH. However, behind its success lies concerns about centralization risks: the "permissioned" validator set, LDO token's control over core permissions, and the incident of a hot wallet being hacked in May 2025, all raised alarms.

In April 2023, the Ethereum Shanghai upgrade allowed ETH withdrawals, weakening Lido's "moat" in terms of liquidity. Users had more choices, turning to centralized platforms or emerging non-custodial competitors. The innovation of re-staking has also intensified the competition.

The removal of Lido is a reflection of institutions' reassessment of "centralization risks". After the upgrade in Shanghai, Lido's "centralized" characteristics have become more pronounced against the backdrop of intensified competition and clearer regulations. Institutions may believe that its risk-reward ratio is no longer attractive. Lido's exit marks an elevation in investors' assessment 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 Layer 2 scaling solution for Ethereum, Optimism carries the important responsibility of enhancing transaction capacity, reducing Gas fees, and improving user experience. Its "Superchain" vision has attracted several star projects. However, in terms of TVL and activity, it still unfortunately lags behind its competitors.

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 of the sequencers goes to the foundation to fund public goods, rather than being directly distributed to token holders. Although there is hope for sharing in the future, this uncertainty affects the token's direct value capture, leaving institutional investors with doubts.

In addition, the governance of Optimism is not without its challenges. The low voter participation and 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 raises profound doubts about its token's "value capture mechanism." Grand ecological visions do not directly translate into 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 power among the core team also increase the complexity and risk of institutional investment. In the face of fierce competition in the Layer 2 space, institutions may believe that OP is unlikely to provide "more attractive risk-adjusted returns" in the short term. The exit of Optimism reflects a deepening assessment of Layer 2 token economics: mere technological leadership is insufficient to support long-term value; the token must have a clear, sustainable value capture mechanism and genuine decentralized governance.

The "Barometer" and "Structural Change" of Cryptocurrency Investment 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 up to 86% of institutional investors surveyed already hold or plan to allocate digital assets, with nearly 60% planning to invest more than 5% of AUM in encryption currencies. The successive approvals of Bitcoin and Ethereum ETFs are like the mainstream financial world opening its doors to encryption currencies, and a well-known asset management company's Bitcoin ETF even set a record for the fastest growth in history.

This tide has long surpassed the "islands" of Bitcoin and Ethereum. Data shows that 73% of investors have already held 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" towards a broad deep sea of "diversified allocation" and "application scenarios landing." The inclusion of Avalanche and Morpho is a profound reflection of the trend of institutional investment "from point to area" and "from speculation to application."

The "Evolutionary Theory" of DeFi: From "Primitive Growth" to "Refined Survival"

In 2024, the total value locked (TVL) in DeFi surged by 129%, while the trading volume of decentralized exchanges (DEXs) skyrocketed by 872%. DeFi is developing yield-bearing stablecoins to attract traditional finance. Trends such as embedded finance, automation, and artificial intelligence/machine learning (AI/ML) are reshaping the landscape. Morpho's success 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 integrate with traditional finance. The explosive growth of derivatives DEXs and the institutional path of Morpho indicate that DeFi is meeting the complex trading and risk management needs of institutions. The preference for Morpho acknowledges the trend of DeFi's "self-evolution and external integration", with optimism for protocols that can enhance efficiency, reduce risk, and connect with traditional finance.

Layer 2's "Race": A Comprehensive Contest 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 the mainstream technologies. The Layer 2 market is highly competitive, with multiple projects competing in TVL and the number of protocols. Optimism is committed to building an interoperable ecosystem through its "Superchain" vision and OP Stack, attracting several heavyweight projects.

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

Regulatory "filter": Compliance, the "ticket" for institutional funds

By 2025, the regulatory environment for cryptocurrencies in the United States will gradually become clearer, acting as a "filter" for institutional funds entering the crypto market. Regulatory agencies will issue new guidelines, clarifying that "protocol staking" is not a securities issuance. Congress will pass a bill that abolishes certain reporting obligations for specific DeFi platforms.

The clarification of regulations is a key "catalyst" for large-scale institutional entry into the encryption market, while also serving as a precise "filter". It reduces legal and operational risks for institutions and encourages more compliant organizations 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 over its "permissioned" nature and governance centralization. Asset management companies, as strictly regulated institutions, place a high priority on compliance in their investment decisions. This indicates that from 2025 onwards, compliance has upgraded to become the "ticket" for attracting institutional capital.

Summary

The adjustment of the rankings clearly outlines the evolution path of institutional investment in the encryption market for 2025. It focuses on technological innovation of projects, real application scenarios, sustainable value capture models, and decentralized governance practices. The inclusion of new projects represents the market's recognition of the explosive potential of high-performance public chains in GameFi/enterprise-level applications, as well as expectations for the institutional-level and compliant development of DeFi lending. The exit of existing projects serves as a warning of the centralized risks of liquid staking and the impact of value capture uncertainty in Layer 2 token economic models on institutional attractiveness.

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

• Application-driven Layer 1/Layer 2: The future belongs to public chains and scaling solutions that can attract large-scale users and enterprise-level applications through technological innovation.
• Institutional-grade DeFi infrastructure: The market favors DeFi protocols that can solve traditional financial pain points and connect the on-chain and off-chain worlds.
• Clear value capture and decentralized governance: Tokens must have a clear, sustainable value capture mechanism and effective decentralized governance.
• Compliance First: Projects that actively embrace compliance and reduce legal risks will be favored by institutions.

For participants in the encryption world, changes in the rankings provide valuable strategic guidance. Investors should go beyond short-term speculation and conduct in-depth research on project fundamentals, technological innovations, ecosystems, token economics, and compliance. Project builders, on the other hand, need to construct healthy and sustainable economic models while achieving technical breakthroughs, strengthening decentralized governance, and actively engaging with transmission.