Decoding New Trends in Institutional Investment: Insights from Grayscale's List on the 2025 Crypto Market Landscape

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 crypto asset management, a well-known investment company's quarterly updated Top 20 asset list resembles a "treasure map" of the crypto market from an institutional perspective, outlining a deep forecast of the "factual adoption trends" for the next phase of the market.

In the third quarter of 2025, this "treasure map" quietly adjusted: the rising star Avalanche(AVAX) and Morpho(MORPHO) leap onto the list, while former giants Lido DAO(LDO) and Layer 2 hopeful Optimism(OP) regretfully exit. In this ebb and flow, what changes in the winds of the crypto market are hidden? We will delve into this together, unveiling the new narrative of crypto investment in 2025 behind this seemingly ordinary list shuffle.

Signals of Structural Reform

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

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

In 2025, the trading 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 activity.

Avalanche accurately captures the demand for GameFi and enterprise-level applications, with games like MapleStory Universe launching on subnet (Subnets). It also actively embraces the traditional world, collaborating with several Web2 giants to promote the tokenization of real-world assets, which is a crucial step for the Web3 economy to penetrate the mainstream.

Investment institutions are optimistic about Avalanche due to its advanced technology, 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 to a broader new track with real economic activities and the potential for integration between Web2 and Web3.

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 the Ethereum and Base chains, optimizing yields and ensuring security through "Morpho Vaults" and isolated markets. Its protocol design focuses on low transaction fees and has undergone over 25 audits.

Morpho has achieved remarkable results: annual fee income reached $100 million, total locked value ( TVL ) doubled to over $4 billion, firmly sitting in the second position of 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 large trading platform has integrated Morpho into its main application, allowing users to borrow USDC against Bitcoin as one of the largest institutional-grade adoption cases in DeFi to date. The release of Morpho V2 further demonstrates the determination to bring DeFi into traditional financial institutions.

The rise of Morpho validates its potential as a "DeFi institutionalization engine." It 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. Investment institutions favor it because they are optimistic about its ability to enhance DeFi efficiency, reduce risks, and effectively connect with traditional finance.

Farewell to the Old Guard: Goodbye to Lido and Optimism

Lido DAO(LDO): The "liquid 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 this success lies concerns about its centralization risks: the "permissioned" validator set, control of core permissions by the LDO token, and the incident in May 2025 when a validation node's hot wallet was compromised, all raised alarm bells.

The Ethereum Shanghai upgrade in April 2023 allowed ETH withdrawals, weakening Lido's "moat" in terms of liquidity. Users now have more choices, turning to centralized platforms or emerging non-custodial competitors. Innovations in restaking, such as EigenLayer, have also intensified the competition.

The removal of Lido is a reflection of investment institutions' reassessment of "centralization risk." After the Shanghai upgrade, Lido's "centralized" characteristics have become more pronounced in the context of intensified competition and clearer regulations, where the SEC views "protocol staking" as a non-securities activity. Investment institutions may consider its risk-reward ratio no longer attractive. Lido's exit marks a higher standard of evaluation for institutional investors regarding 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 mission 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 at the core of the Optimism Collective's decentralized governance structure. However, its revenue distribution model has a "myth": currently, the income from the sequencer 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 token, leaving institutional investors skeptical.

In addition, the governance of Optimism has not been smooth sailing. 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 investment institutions regarding its OP token's "value capture mechanism." Grand ecological visions cannot directly translate into clear value for the token. Institutional investors tend to prefer clear and direct pathways for token value capture. Low governance participation and the concentration of voting power within the core team also increase the complexity and risk of institutional investment. Faced with fierce competition in the Layer 2 space, investment institutions may believe that OP is unlikely to provide "more attractive risk-adjusted returns" in the short term. Optimism's exit signifies a deepening evaluation of Layer 2 token economics by institutions: mere technological leadership is insufficient to support long-term value; tokens must possess clear, sustainable value capture mechanisms and genuine decentralized governance.

Behind the Rankings: The "Barometer" and "Structural Change" of Crypto Investment in 2025

( The "tide" of institutional funds: a vast deep sea from Bitcoin to 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% planning to invest over 5% of AUM in cryptocurrency. The successive approval of Bitcoin and Ethereum ETFs has opened the doors of the mainstream financial world to cryptocurrencies, with a well-known asset management company's Bitcoin ETF even setting 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 belief" to a broad deep sea of "diversified allocation" and "application scenario implementation". The inclusion of Avalanche and Morpho in the list is a profound reflection of the trend of institutional investment "from point to area" and "from speculation to application."

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

In 2024, the total locked value of DeFi surged by 129% to ) 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 improve 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 path of Morpho indicate that DeFi is meeting the complex trading and risk management needs of institutions. The preference of investment institutions for Morpho is recognition of the trend of DeFi's "self-evolution and external integration", optimistic about 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, akin to 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 leading in TVL and the number of protocols. Optimism, through its "Super Chain" vision and OP Stack, is committed to building an interoperable ecosystem and has attracted several heavyweight projects.

The competition for Layer 2 has shifted to a comprehensive contest of "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 there are centralization risks, it is difficult to gain the long-term favor of institutional investors. Investment institutions' assessments of Layer 2 have gone beyond superficial indicators and delved into mechanisms for long-term sustainable value creation and distribution.

Regulatory "filter": compliance, institutional funds "ticket to entry"

In 2025, the regulatory environment for cryptocurrencies in the United States gradually becomes clear, acting as a "filter" for institutional funds entering the crypto market. The SEC releases new guidelines, clarifying that "protocol staking" is not a securities issuance. The U.S. Congress passes a bill that abolishes the IRS broker reporting obligation for non-traditional fiat currency inflows and outflows of DeFi platform (.

The clarification of regulations 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 and encourages more compliant entities to enter the PoS ecosystem and DeFi. However, clearer regulations also mean stricter compliance requirements. Lido's removal may be partly due to concerns about its "licensing system" and governance centralization. As a highly regulated asset management company, investment decisions place a strong emphasis on compliance. This indicates that from 2025 onwards, compliance has upgraded to become the "ticket" for attracting institutional capital.

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Summary

The adjustment of the ranking clearly outlines the evolution path of institutional investment in the crypto market by 2025. It focuses on the technical 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 the expectation for DeFi lending to develop towards institutional-level and compliance. The exit 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 crypto 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 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.