New Landscape of Encryption Asset Management: Grayscale Rankings Changes Reveal Industry Trends

In the ever-changing world of encryption, the movements of institutional capital are often key clues to insights about the future. As a pioneer in the field of encryption asset management, Grayscale Investments updates its Top 20 asset list every quarter, resembling a "treasure map" of the encryption market from an institutional perspective, outlining a deep premonition of the "factual adoption trends" for the next stage of the market.

In the third quarter of 2025, Grayscale's "treasure map" quietly adjusted: the rising stars Avalanche (AVAX) and Morpho (MORPHO) made their appearance on the list, while former giants Lido DAO (LDO) and Layer 2 hopeful Optimism (OP) regrettably exited. What shifts in the encryption market are hidden behind this ebb and flow? Let's delve deeper and uncover the new narrative of crypto investment in 2025 behind this seemingly ordinary list change.

Signals of Structural Change

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

Avalanche depicts a scalable and customizable blockchain future. Its "Avalanche 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 soared 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 GameFi and enterprise-level application demands, with games like MapleStory Universe launching on 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 Web3 economy to penetrate the mainstream.

Grayscale is optimistic about Avalanche due to its technological advancements, strategic ecological expansion, and the "multi-dimensional growth flywheel" formed by its integration with Web2. This signifies that the competition among Layer 1s is shifting towards a broader new track with real economic activities and the potential for Web2/Web3 integration.

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 returns 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 income reached $100 million, total locked value (TVL) doubled to over $4 billion, firmly holding the second position in DeFi lending. On the Base chain, it is the protocol with the largest 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 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 institutional engine." It deeply understands the demands of institutions regarding risk management and compliance, addressing the pain points of traditional finance entering DeFi through refined market design and support for regulated markets. Grayscale favors it precisely because it enhances DeFi efficiency, reduces risk, and effectively connects with traditional finance.

The Old Guards Depart: 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 its success lies concerns about centralization risks: the "permissioned" validator set, the control of core permissions by the LDO token, and the incident in May 2025 when the Chorus One hot wallet was hacked, all of which raised alarms.

In April 2023, the Ethereum Shanghai upgrade allowed for ETH withdrawals, 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 being removed is a reflection of Grayscale's reevaluation of "centralization risk". After the Shanghai upgrade, Lido's "centralization" characteristics have become more pronounced against the backdrop of intensified competition and clearer regulations (regulators viewing "protocol staking" as a non-security activity). Grayscale may believe that its risk-reward ratio is no longer attractive. Lido's exit marks an increase in the evaluation standards of institutional investors regarding liquid staking, placing greater importance on decentralization, governance transparency, and potential regulatory risks.

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

Optimism, as a leading Layer 2 scaling solution for Ethereum, carries the important responsibility of enhancing transaction capacity, reducing Gas fees, and improving user experience. Its vision of a "Superchain" has attracted multiple star projects through the OP Stack. However, in terms of TVL and activity, it still lags slightly behind its competitors.

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

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

The removal of Optimism is more like Grayscale's profound questioning of the "value capture mechanism" of its OP tokens. A grand ecological vision cannot be directly translated into a clear value for the tokens. Institutional investors tend to prefer clear and direct paths for token value capture. Low governance participation and the concentration of voting power within the core team also increase the 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 reflects a deepening assessment by institutions of Layer 2 token economics: mere technological superiority is insufficient to support long-term value; tokens must have clear, sustainable value capture mechanisms and genuine decentralized governance.

Behind the Grayscale List: The "Barometer" and "Structural Change" of Cryptocurrency Investment in 2025

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

In the first quarter of 2025, institutional interest in digital assets continues to surge. Surveys show that as many as 86% of surveyed institutional investors have held or plan to allocate digital assets, with nearly 60% (59%) planning to invest more than 5% of AUM in encryption currencies. The successive approvals of Bitcoin and Ethereum ETFs are like opening the doors of the mainstream financial world to encryption currencies, and a certain asset management giant's Bitcoin ETF has even set a 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 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 mere "Bitcoin belief" to a broad deep sea of "diversified allocation" and "application scenarios 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 "Evolutionary Theory" of DeFi: From "Barbaric 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, 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 are aimed at solving pain points and enhancing efficiency. Yield-bearing stablecoins and embedded finance enrich product forms and seamlessly connect with traditional finance. The explosive growth of derivative DEXs and the institutional pathway of Morpho 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 forward to 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 and ZK-Rollups are the mainstream technologies. The Layer 2 market is highly competitive, with one platform currently leading in both TVL and the number of protocols. Optimism, through its "superchain" vision and OP Stack, is committed to building an interoperable ecosystem, attracting several heavyweight projects.

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

Regulatory "filter": compliance, the "entry ticket" for institutional funds

In 2025, the cryptocurrency regulatory environment in the United States gradually becomes clearer, like a "filter" that paves the way for institutional funds to enter the crypto market. Regulatory agencies issue new guidelines, clarifying that "protocol staking" is not a securities offering. The U.S. Congress passes a bill abolishing the broker reporting obligation for DeFi platforms (non-traditional fiat currency deposits and withdrawals).

The clarification of regulations is a key "catalyst" for institutions to enter the encryption market on a large scale, while also serving as a precise "filter". It reduces the 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 "licensing system" and governance centralization. Grayscale, as a strictly regulated asset management company, places high importance on compliance in its investment decisions. This indicates that from 2025 onward, 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 encryption market by 2025. It focuses on the project's technological innovation, 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/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 uncertainty in value capture within 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-level DeFi infrastructure: The market favors DeFi protocols that can address the pain points of traditional finance 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: Actively embrace compliance and reduce legal risks.