Clearing the fog, where is the Grayscale list pointing?
In the fast-changing world of cryptocurrency, the movement of institutional capital often serves as a key clue to insights about the future. Grayscale Investments, as a pioneer in the crypto asset management industry, updates its list of the Top 20 assets quarterly, resembling a 'treasure map' of the crypto market from an institutional perspective, outlining profound predictions of the next stage market's 'fact-based adoption trends'.
Source: Grayscale
In the third quarter of 2025, Grayscale's 'treasure map' has quietly adjusted: the emerging Avalanche ($AVAX) and Morpho ($MORPHO) leap onto the list, while the former giants Lido DAO ($LDO) and Layer2 hope star Optimism ($OP) regrettably exit. What changes in the crypto market are hidden between the entrance and exit? We will deeply analyze this seemingly ordinary list change and unveil the new narrative of crypto investment in 2025.
Source: (MarsBit)
Signals of structural change
The strong pulse of Avalanche $AVAX on-chain
Avalanche ($AVAX) depicts a future of scalable and customizable blockchains. Its 'Avalanche consensus mechanism' achieves high throughput, low latency, and decentralization, with a three-chain architecture (X-Chain, C-Chain, P-Chain) ensuring 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 the Etna upgrade, which reduced average transaction fees by over 90%, greatly stimulating on-chain vitality.
Avalanche accurately captures the demand for GameFi and enterprise-level applications, with games like MapleStory Universe launching on its subnets. It also actively embraces the traditional world, collaborating with Web2 giants like Amazon Web Services (AWS) and Alibaba Cloud to promote the tokenization of real-world assets, a crucial step for Web3 economy's penetration into the mainstream.
Grayscale is optimistic about Avalanche because of its technological advancement, strategic ecosystem expansion, and integration with Web2 forming a 'multi-dimensional growth flywheel'. This indicates that Layer 1 competition is shifting towards a broader new track with real economic activities and the potential for integration between Web2 and Web3.
Morpho $MORPHO 'Transformers'-style decentralized lending
Morpho ($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 more than 25 audits.
Morpho has achieved remarkable results: annual fee income reaches $100 million, total value locked (TVL) doubled to over $4 billion, firmly sitting in the second position in DeFi lending. On the Base chain, it has become the protocol with the largest TVL and active loan volume. Top venture capital firms like a16z Crypto and Pantera Capital invested over $69 million.
More significantly, Coinbase has integrated Morpho into its main application, allowing users to borrow $USDC collateralized by Bitcoin, marking one of the largest institutional-grade adoption cases of DeFi to date. The launch of Morpho V2 further signifies the determination to bring DeFi into traditional financial institutions.
Morpho's rise validates its potential as a 'DeFi institutional 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 permissioned markets. Grayscale favors it, as it enhances DeFi efficiency, reduces risk, and effectively connects with traditional finance.
Old players exit: the farewell of Lido and Optimism
Lido DAO $LDO's liquid staking 'empire' faces headwinds
Lido DAO was once the undisputed 'empire' giant of Ethereum's liquid staking industry, managing about 33% of staked Ether. However, the success comes with concerns over its centralization risks: 'permissioned' validator series, control of core privileges by $LDO token, and the May 2025 attack on Chorus One's hot wallet have all sounded alarm bells.
The Ethereum Shanghai upgrade in April 2023 allowed Ether withdrawals, weakening Lido's 'moat' in liquidity. Users have more options, turning to centralized platforms (like Coinbase, Kraken) or emerging non-custodial competitors. Innovations like EigenLayer in re-staking have also intensified competition.
The removal of Lido reflects Grayscale's reassessment of 'centralization risks'. After the Shanghai upgrade, Lido's 'centralization' characteristic has become more pronounced against the backdrop of intensified competition and clearer regulations (the SEC regards 'protocol staking' as a non-security activity). Grayscale may find its risk-reward ratio no longer attractive. Lido's exit symbolizes that institutional investors have raised their evaluation standards for liquid staking, placing more emphasis on decentralization, governance transparency, and potential regulatory risks.
Optimism $OP Layer2's grand vision is trapped in the 'myth' of value capture
Optimism, as a leading Layer2 scaling solution for Ethereum, bears the responsibility of enhancing transaction capacity, reducing gas fees, and improving user experience. Its 'Superchain' vision has attracted star projects like Coinbase's Base chain through OP Stack. However, in terms of TVL and activity, it still lags slightly behind its competitor Arbitrum.
$OP token is central to the decentralized governance structure of Optimism Collective. However, its revenue distribution model has a 'myth': currently, the income of the sequencer goes to the Optimism Foundation for funding public goods, rather than being distributed directly to $OP token holders. Although sharing is expected in the future, this uncertainty affects the direct value capture of the token, leaving institutional investors wary.
Moreover, Optimism's governance is not without its challenges. Low voting participation and significant control of the voting process by core contributors and early investors show that the commitment to 'decentralization' still has room for improvement in practice.
The removal of Optimism feels more like a profound questioning of its $OP token 'value capture mechanism' by Grayscale. A grand ecological vision does not directly translate into clear value for the token. Institutional investors prefer a clear and direct path for token value capture. Low governance participation and concentration of voting rights among core teams also add complexity and risk to institutional investment. In the face of intense competition in the Layer2 space, Grayscale may believe that $OP is unlikely to provide a 'more attractive risk-adjusted return' in the short term. Optimism's exit reflects the deepening evaluation of institutional interest in Layer2 token economics: simple technological leadership is insufficient to support long-term value; tokens must have clear, sustainable value capture mechanisms and genuine decentralized governance.
Source: (MarsBit)
Behind the 2025 list: the 'barometer' of crypto investment and 'structural change'
The 'tide' of institutional capital: from Bitcoin to a vast ocean of diversified applications
In the first quarter of 2025, institutional interest in digital assets continues to soar. Surveys show that up to 86% of surveyed institutional investors already hold or plan to allocate digital assets, with nearly 60% (59%) planning to invest more than 5% of AUM in cryptocurrencies. The successive approvals of Bitcoin and Ethereum ETFs are like the mainstream financial world opening its doors to cryptocurrencies, with BlackRock's Bitcoin ETF even setting 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 already hold alternative cryptocurrencies, with DeFi participation 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, and protocols like Aave connecting DeFi with traditional finance.
Institutional investment is moving from simple 'Bitcoin faith' to a vast ocean of 'diversified allocation' and 'application scenarios'. The inclusion of Avalanche and Morpho in the Grayscale list is a profound reflection of the trend of institutional investment 'from point to surface', 'from speculation to application'.
The 'evolution' of DeFi: from 'barbaric growth' to 'meticulous survival'
In 2024, the total value locked (TVL) in DeFi surged by 129%, and the trading volume of decentralized exchanges (DEXs) for derivative financial products skyrocketed by 872%. DeFi is developing yield-generating 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 innovation in DeFi lending.
DeFi is undergoing an 'evolution' from 'barbaric growth' to 'meticulous survival'. Layer2 and AI/ML applications aim to address pain points and improve efficiency. Yield-generating stablecoins and embedded finance enrich product forms and seamlessly connect with traditional finance. The explosive growth of derivative financial products DEXs and Morpho's institutional path indicate that DeFi is meeting the complex trading and risk management needs of institutions. Grayscale's favoring of Morpho acknowledges the trend of DeFi's 'self-evolution and external integration', optimistic about protocols that can enhance efficiency, reduce risk, and connect with traditional finance.
The 'race' of Layer2: a comprehensive contest of ecosystem, technology, and value capture
Layer2 solutions, like Ethereum's 'highway', significantly enhance scalability and reduce user costs. Optimistic Rollups (like Optimism, Arbitrum) and ZK-Rollups are mainstream technologies. The Layer2 market is highly competitive, with Arbitrum currently leading in TVL and protocol numbers. Optimism is committed to building an interoperable ecosystem through its 'Superchain' vision and OP Stack, attracting heavyweight projects like Coinbase's Base chain.
The competition for Layer2 has shifted to a comprehensive contest of 'ecosystem-building capabilities' and 'token value capture models'. The removal of Optimism precisely illustrates: 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 long-term favor from institutions. Grayscale's assessment of Layer2 has moved beyond surface indicators to delve into long-term sustainable value creation and distribution mechanisms.
The 'filter' of regulation: compliance is the 'ticket' for institutional capital entry.
In 2025, the regulatory environment for cryptocurrencies in the United States becomes gradually clear, akin to erecting a 'filter' for institutional capital entering the crypto market. The U.S. Securities and Exchange Commission (SEC) issued new guidelines clarifying that 'protocol staking' is not a securities issuance. The U.S. Congress passed a bill that abolished the IRS's reporting obligation for brokers related to DeFi platforms (non-traditional fiat deposits and withdrawals).
Clarification of regulations is a key 'catalyst' for institutions to enter the crypto market en masse, as well as a precise 'filter'. It reduces 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. The removal of Lido may partly stem from concerns over its 'permissioned' nature and governance centralization. As a strictly regulated asset management firm, Grayscale places great emphasis on compliance in its investment decisions. This indicates that compliance has become the 'ticket' for attracting institutional capital in 2025 and beyond.
Summary
The adjustments to Grayscale's Top 20 asset list clearly outline 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 market recognition of the explosive potential of high-performance public chains in GameFi/enterprise-level applications, as well as expectations for DeFi lending to develop towards institutional-grade and compliance. The exit of Lido DAO and Optimism warns of the centralization risks in liquid staking and the impact of value capture uncertainty in Layer2 token economics on institutional attractiveness.
Summary of the core investment logic for the 2025 crypto market:
Application-driven Layer 1/Layer 2 futures belong 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 on-chain and off-chain worlds.
Clear value capture and decentralized governance: tokens need to 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 crypto world, the Grayscale list provides valuable strategic guidance. Investors should go beyond short-term speculation and delve into project fundamentals, technological innovation, ecosystems, token economics, and compliance. Project builders need to construct healthy and sustainable economic models while strengthening decentralized governance and actively integrating with the traditional financial world to seize institutional funding opportunities. In 2025, the crypto market is moving from 'barbaric growth' to 'meticulous cultivation', just as the referenced article states: 'Value discovery is often not because it is cheap, but because the structure is right.' Understanding the structural beauty behind this is crucial for grasping the future.
This article is authorized for reprint from: (MarsBit)
Original title: (Grayscale Q3 Top 20 list released, AVAX, MORPHO listed, LDO, OP eliminated)
Original author: Luke, Mars Finance
'Grayscale's latest TOP 20 cryptocurrencies released! LDO, OP eliminated, these 2 coins on the list' this article was first published in 'Crypto City'
