After clearing away the fog, where does the Grayscale list point to?

In the ever-changing world of cryptocurrencies, the movement of institutional capital is often a key clue to the future. Grayscale Investments, as a pioneer in the field of crypto asset management, updates its Top 20 asset list every quarter, which is more like a "treasure map" of the crypto market from an institutional perspective, outlining a deep prediction of the "factual adoption trend" of the market in the next stage.

In the third quarter of 2025, Grayscale's "treasure map" was quietly adjusted: newcomers Avalanche (AVAX) and Morpho (MORPHO) jumped onto the list, while former giants Lido DAO (LDO) and Layer 2 hopeful Optimism (OP) left the market with regret. What changes in the crypto market are hidden between the advance and retreat? We will analyze in depth and uncover the new narrative of crypto investment in 2025 behind this seemingly ordinary list change.

Signals of structural change

Avalanche AVAX Chain's Strong "Pulse"

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

In 2025, Avalanche’s C-Chain transaction volume soared from 250,000 to nearly 1.2 million, thanks to the Etna upgrade that reduced average transaction fees by more than 90%, greatly stimulating on-chain vitality.

Avalanche accurately captures the needs of GameFi and enterprise-level applications, and games such as MapleStory Universe are launched on subnets. It also actively embraces the traditional world and cooperates with Web2 giants such as Amazon Web Services (AWS) and Alibaba Cloud 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 because of its "multi-dimensional growth flywheel" formed by its technological advancement, strategic ecological expansion and Web2 integration. This indicates that the Layer 1 competition is shifting to a broader new track with real economic activities and Web2/Web3 integration potential.

Morpho MORPHO “Transformers” style decentralized lending

Morpho (MORPHO) is charting a new institutional path for decentralized lending. It is a DeFi lending protocol based on Ethereum and Base chain, which optimizes returns and ensures security through "Morpho Vaults" and isolated markets. Its protocol design focuses on low transaction fees and has been audited more than 25 times.

Morpho has achieved remarkable results: annualized fee income reached $100 million, and the total locked value (TVL) doubled to more than $4 billion, firmly sitting in the second place in DeFi lending. On the Base chain, it is already the protocol with the largest TVL and active loan volume. Top venture capital firms such as a16z Crypto and Pantera Capital have invested more than $69 million.

Even more significant is that Coinbase has integrated Morpho into its main application, allowing users to borrow USDC with Bitcoin as collateral, which is one of the largest institutional adoption cases of DeFi to date. The release of Morpho V2 further demonstrates its determination to introduce DeFi into traditional financial institutions.

The rise of Morpho has verified its potential as a "DeFi institutionalization engine". It is well aware of the requirements of institutions for risk management and compliance, and solves the pain points of traditional finance entering DeFi through refined market design and support for the licensed market. Grayscale favors it because it is optimistic about its ability to improve DeFi efficiency, reduce risks, and effectively connect with traditional finance.

The departure of old players and the farewell of Lido and Optimism

Lido DAO LDO Liquidity Staking “Empire” Faces Headwinds

Lido DAO was once the undisputed "empire" giant in the field of Ethereum liquidity staking, managing about 33% of the staked ETH. However, behind its success are concerns about its centralization risks: the "permissioned" validator set, the control of LDO tokens over core permissions, and the Chorus One hot wallet hack in May 2025 have all sounded the alarm.

The Ethereum Shanghai upgrade in April 2023 allows ETH withdrawals, weakening Lido's "moat" in liquidity. Users have more choices, turning to centralized platforms (such as Coinbase, Kraken) or emerging non-custodial competitors. Re-staking innovations such as EigenLayer have also intensified competition.

Lido's removal is a microcosm of Grayscale's reassessment of "centralization risk". After the Shanghai upgrade, Lido's "centralized" characteristics have become more prominent against the backdrop of intensified competition and clearer regulation (SEC considers "protocol pledge" as a non-securities activity). Grayscale may believe that its risk-return ratio is no longer attractive. Lido's withdrawal indicates that institutional investors have raised their assessment standards for liquidity pledges, placing more emphasis on decentralization, governance transparency, and potential regulatory risks.

Optimism OP Layer 2’s grand vision is trapped in the “myth” of value capture

As a leader in Ethereum Layer 2 expansion solutions, Optimism is tasked with improving transaction capabilities, reducing gas fees, and improving user experience. Its "Superchain" vision has attracted star projects such as Coinbase's Base Chain through OP Stack. However, in terms of TVL and activity, it still lags behind its competitor Arbitrum.

OP tokens are the core of the decentralized governance structure of Optimism Collective. However, there is a "myth" in its revenue distribution model: currently, the sorter revenue belongs to the Optimism Foundation and is used 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 and makes institutional investors doubtful.

In addition, Optimism governance is not without its problems. Low voting participation and greater control over the voting process by core contributors and early investors mean that the "decentralization" promise still has room for improvement in practice.

The removal of Optimism is more like Grayscale's deep questioning of the "value capture mechanism" of its OP token. The grand ecological vision cannot be directly translated into the clear value of the token. Institutional investors prefer clear and direct token value capture paths. Low governance participation and the concentration of voting rights by the core team also increase the complexity and risk of institutional investment. Faced with fierce competition in the Layer 2 track, Grayscale may believe that OP will find it difficult to provide "more attractive risk-adjusted returns" in the short term. The withdrawal of Optimism reflects the deepening of institutions' assessment of the economics of Layer 2 tokens: pure technological leadership is not enough to support long-term value, and tokens must have clear, sustainable value capture mechanisms and truly decentralized governance.

Behind the list: the "barometer" and "structural changes" of crypto investment in 2025

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

In the first quarter of 2025, institutional interest in digital assets continued to rise. The survey showed that as many as 86% of institutional investors surveyed already hold or plan to allocate digital assets, and nearly 60% (59%) plan to invest more than 5% of AUM in cryptocurrencies. The approval of Bitcoin and Ethereum ETFs is like the mainstream financial world opening the door to cryptocurrencies. BlackRock's Bitcoin ETF even set the fastest growth record in history.

This tide has already surpassed the two "islands" of Bitcoin and Ethereum. Data shows that 73% of investors already hold alternative cryptocurrencies, and participation in DeFi is expected to triple in two years. The tokenization of real world assets (RWA) and the adoption of stablecoins are accelerating, with a total market value of $234 billion. Protocols such as Aave connect DeFi with traditional finance.

Institutional investment is moving from a simple "belief in Bitcoin" to the vast 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".

DeFi's "Evolution" From "Wild Growth" to "Refined Survival"

In 2024, DeFi’s total locked value (TVL) surged by 129%, and the volume of derivatives decentralized exchanges (DEXs) soared by 872%. DeFi is developing yield-based stablecoins, attracting 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 are designed to solve pain points and improve efficiency. Yield-based stablecoins and embedded finance enrich product forms and seamlessly connect with traditional finance. The explosive growth of derivatives DEXs and the institutionalization path of Morpho indicate that DeFi is meeting the complex trading and risk management needs of institutions. Grayscale's favor for Morpho is a recognition of DeFi's trend of "self-evolution and external integration", and is optimistic about protocols that can improve efficiency, reduce risks, and connect traditional finance.

Layer 2’s “race”: a comprehensive competition of ecology, technology, and value capture

Layer 2 solutions, like Ethereum's "highways", significantly improve 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, and Arbitrum currently still leads in TVL and number of protocols. Optimism is committed to building an interoperable ecosystem through its "super chain" vision and OP Stack, attracting heavyweight projects such as Coinbase's Base chain.

The competition of Layer 2 has turned to a comprehensive contest of "ecosystem building capabilities" and "token value capture model". The removal of Optimism just shows that even if there is a grand ecological vision, if the token value capture mechanism is not clear enough or there is a risk of centralization, it will be difficult to gain long-term favor from institutions. Grayscale's evaluation of Layer 2 has gone beyond superficial indicators and has penetrated into the long-term sustainable value creation and distribution mechanism.

Regulatory "Filter" Compliance, the "Entry Ticket" for Institutional Funds

In 2025, the regulatory environment for cryptocurrencies in the United States gradually became clear, like a "filter" for institutional funds to enter the crypto market. The U.S. Securities and Exchange Commission (SEC) issued new guidelines to clarify that "protocol pledge" is not a securities issuance. The U.S. Congress passed a bill to abolish the U.S. Internal Revenue Service (IRS) broker reporting obligations for DeFi platforms (non-traditional fiat currency deposits and withdrawals).

Regulatory clarity is a key "catalyst" for institutions to enter the crypto market on a large scale, and it is also a sophisticated "screener". It reduces the legal and operational risks of institutions and encourages more compliant institutions to enter the PoS ecosystem and DeFi. However, clear regulation also means stricter compliance requirements. Lido's removal may be partly due to its "licensing system" and concerns about governance centralization. As a strictly regulated asset management company, Grayscale attaches great importance to compliance in its investment decisions. This shows that in 2025 and beyond, compliance has been upgraded to an "admission ticket" to attract institutional capital.

summary

The adjustment of Grayscale's Top 20 asset list clearly outlines the evolution path of institutional investment in the crypto market in 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 applications, as well as the expectation that DeFi lending will develop towards institutional and compliant levels. The elimination of Lido DAO and Optimism warns of the centralized risks of liquidity staking and the impact of value capture uncertainty in the Layer 2 token economic model on institutional attractiveness.

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

• The future of application-driven Layer 1/Layer 2 will belong to public chains and expansion solutions that can attract large-scale users and enterprise-level applications through technological innovation.
• The institutional-level DeFi infrastructure market favors DeFi protocols that can solve the pain points of traditional finance and connect the on-chain and off-chain worlds.
• Clear value capture and decentralized governance Tokens need to have clear and sustainable value capture mechanisms and effective decentralized governance.
• Projects that prioritize compliance and actively embrace compliance and reduce legal risks will be favored by institutions.

For participants in the crypto world, the Grayscale list provides valuable strategic guidance. Investors should go beyond short-term speculation and conduct in-depth research on project fundamentals, technological innovation, ecosystem, token economics and compliance. Project builders need to build a healthy and sustainable economic model while making technological breakthroughs, strengthen decentralized governance, and actively integrate with the traditional financial world to seize institutional funding opportunities. In 2025, the crypto market is moving from "barbaric growth" to "intensive cultivation", just as the reference article said: "Value discovery is often not because of cheapness, but because of the right structure." Only by understanding the beauty of the structure behind this can we grasp the future.