New Trends in the Crypto Market: The Deep Meaning Behind the Changes in the Grayscale Rankings

In the ever-changing world of encryption, the movements of institutional capital often guide the direction of the future. As a pioneer in the crypto asset management field, Grayscale Investments updates its list of the Top 20 assets every quarter, which can be regarded as a "treasure map" of the crypto market from an institutional perspective, reflecting a deep judgment on the adoption trends of the next stage of the market.

In the third quarter of 2025, this "treasure map" quietly adjusted: the newcomer Avalanche(AVAX) and Morpho(MORPHO) leapt onto the rankings, while the former giant Lido DAO(LDO) and Layer 2 hope star Optimism(OP) regrettably exited the scene. Between this ebb and flow, what changes in direction are hidden within the crypto market? Let us delve deeper and unveil the new narrative of crypto investment in 2025.

Signals of Structural Reform

Avalanche(AVAX): The strong pulse on-chain

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 groundwork for large-scale applications.

In 2025, the trading 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 precisely captures the needs of GameFi and enterprise-level applications, launching multiple games on its subnet. 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 mainstream.

Grayscale is optimistic about Avalanche because of its technological advancements, strategic ecosystem expansion, and the formation of a "multi-dimensional growth flywheel" through 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 charting a new institutional path for decentralized lending. It is a DeFi lending protocol based on the Ethereum and Base chains, optimizing yields and ensuring security through "Morpho Vaults" and isolated markets. The protocol design focuses on low transaction fees and has undergone multiple audits.

Morpho has achieved remarkable results: annual fee income has reached $100 million, and the 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 protocol with the largest TVL and active loan volume. Several top venture capitals have invested over $69 million.

More significantly, a trading platform has integrated Morpho into its main application, allowing users to borrow USDC against Bitcoin as one of the largest institutional-level adoption cases in DeFi to date. The release of Morpho V2 further asserts the determination to bring DeFi into traditional financial institutions.

The rise of Morpho validates its potential as a "DeFi institutionalization engine." It understands the demands 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 because it is optimistic about its ability to enhance DeFi efficiency, reduce risks, and effectively connect with traditional finance.

Farewell to the Old Players: Goodbye 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 its centralization risks: the "permissioned" validator set, the control of core permissions by the LDO token, and an event in May 2025 have all sounded alarm bells.

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. Re-staking innovations have also intensified competition.

Lido's removal is a reflection of Grayscale's reassessment of "centralization risk." After the Shanghai upgrade, Lido's "centralized" 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 marks an increase in institutional investors' 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.

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

The OP token is the core of the Optimism Collective's decentralized governance structure. However, its revenue distribution model has a "myth": currently, the sequencer's income belongs to the Optimism Foundation, which 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 token's direct value capture, causing institutional investors to have concerns.

In addition, the governance of Optimism 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 is more like Grayscale's profound questioning of its OP token "value capture mechanism." Grand ecological visions cannot be directly translated 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 within the core team also increase the complexity and risks of institutional investment. In the face of fierce competition in the Layer 2 track, 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 institutional assessment of Layer 2 token economics: mere technological leadership is insufficient to support long-term value; tokens must have clear, sustainable value capture mechanisms and genuine decentralized governance.

Behind the Grayscale Rankings: The "Barometer" and "Structural Change" of Crypto 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 as many as 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. The successive approval of Bitcoin and Ethereum ETFs is like opening the door to encryption for the mainstream financial world, and a certain asset management company's Bitcoin ETF 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 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 capitalization reaching $234 billion, connecting multiple protocols between DeFi and traditional finance.

Institutional investment is moving from a simple "Bitcoin faith" 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 plane" and "from speculation to application".

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

In 2024, the total locked value of DeFi surged by 129%, reaching ) TVL ###, 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. 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-bearing stablecoins and embedded finance enrich product forms, seamlessly integrating 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 favoring of Morpho is an acknowledgment of the trend of DeFi's "self-evolution and external integration," which is optimistic about protocols that can enhance efficiency, reduce risk, and connect with traditional finance.

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

Layer 2 solutions, akin to Ethereum's "highway", significantly enhance its scalability and reduce user costs. Optimistic Rollups and ZK-Rollups are mainstream technologies. The competition in the Layer 2 market is fierce, with one platform currently maintaining a lead in TVL and number of protocols. Optimism, through its "super chain" vision and OP Stack, is dedicated to building an interoperable ecosystem, attracting multiple heavyweight projects.

The competition for Layer 2 has shifted to a comprehensive contest between "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 mechanism is not clear enough or has centralization risks, it will be difficult to gain long-term favor from institutions. Grayscale's evaluation of Layer 2 has surpassed superficial metrics 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 clearer, serving as a "filter" for institutional funds entering the crypto market. Regulatory agencies issued new guidelines clarifying that "protocol staking" is not considered a securities offering. The U.S. Congress passed a bill eliminating certain reporting obligations for DeFi platforms.

The clarification of regulation is a key "catalyst" for large-scale institutional entry into the crypto market, and also serves as a precise "filter". It reduces the 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. Lido being removed may be partly due to concerns over its "licensing system" 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 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 crypto market by 2025. It focuses on 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/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:

1. 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.
2. 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.
3. Clear value capture and decentralized governance: Tokens need to have a clear, sustainable value capture mechanism and effective decentralized governance.
4. Compliance First: Projects that actively embrace compliance and reduce legal risks will be favored by institutions.

For participants in the crypto world, the Grayscale 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 integration.