Crypto Market Trend Analysis: Grayscale Investment Q3 Rankings Reveal New Directions in the Industry

In the ever-changing encryption field, the trends of institutional capital often signify future trends. As a leading asset management company in the industry, Grayscale Investments' quarterly updated Top 20 crypto assets list is undoubtedly an important window for observing the preferences of institutional investors.

In the third quarter of 2025, some notable changes occurred in Grayscale's rankings: the newcomers Avalanche ( AVAX ) and Morpho ( MORPHO ) made their debut, while the established projects Lido DAO ( LDO ) and Layer 2 star Optimism ( OP ) unfortunately did not make the cut. What market trends do these changes reflect? Let's delve deeper together.

Avalanche: The New Force of Layer 1

Avalanche, as a new generation public chain, has gained market favor with its outstanding scalability and high performance. Its unique "Avalanche Consensus" and three-chain architecture achieve sub-second transaction finality, laying the foundation for large-scale applications.

In 2025, the activity on the Avalanche chain significantly increased, with C-Chain transaction volume rising from 250,000 to nearly 1.2 million. This was mainly attributed to the Etna upgrade, which greatly reduced transaction fees and revitalized the ecosystem.

Avalanche is actively expanding in the GameFi and enterprise application sectors. Well-known games like MapleStory Universe have chosen to operate on its subnet, showcasing its potential in the gaming field. At the same time, Avalanche is collaborating with several cloud computing giants to promote the tokenization of real-world assets, which is a key step for Web3 to penetrate the mainstream.

Grayscale is optimistic about Avalanche, as it focuses on its technological advancements, ecological expansion, and the positive cycle formed by its integration with traditional sectors. This also indicates that the competition among Layer 1 solutions is shifting towards broader application scenarios and the integration of Web2/Web3.

Morpho: Institutional Exploration of DeFi

Morpho is reshaping the future of decentralized lending. As a DeFi protocol based on Ethereum and Base chains, Morpho ensures safety while optimizing yields through its innovative "Morpho Vaults" and isolated market design.

Morpho's performance is impressive: with an annualized income of $100 million, the total locked value has doubled to over $4 billion, firmly holding the second position in DeFi lending. On the Base chain, Morpho is also the protocol with the highest TVL and active loan volume. The favor of top venture capitalists further confirms its potential.

Morpho's most groundbreaking advancement is its partnership with Coinbase. Coinbase has integrated Morpho into its main application, allowing users to borrow USDC against Bitcoin collateral, which is one of the largest applications of DeFi in the institutional space. The release of Morpho V2 further underscores its commitment to connecting DeFi with traditional finance.

The rise of Morpho validates its potential as a "DeFi institutionalization engine." It deeply understands the requirements of institutions for risk management and compliance, addressing the pain points of traditional finance entering DeFi through meticulous design. Grayscale's favor reflects confidence in its ability to enhance DeFi efficiency, reduce risks, and effectively connect with traditional finance.

Lido DAO: Concerns of the Liquidity Staking Giant

Lido DAO was once the undisputed leader in the Ethereum liquid staking sector, managing about 33% of staked ETH. However, behind its success lies concerns about centralization risks: the "permissioned" nature of the validator pool, the control of the LDO token over core privileges, and the hot wallet attack incident that occurred in May 2025 have all raised market vigilance.

After the Ethereum Shanghai upgrade in April 2023, ETH withdrawals became possible, which weakened Lido's advantage in liquidity. Users had more options, with some turning to centralized platforms or emerging non-custodial competitors. Innovations like EigenLayer's restaking also intensified the competition.

Lido has been removed from the Grayscale list, reflecting institutional investors' reassessment of "centralization risk." After the Shanghai upgrade, Lido's centralization characteristics have become more pronounced against the backdrop of intensified competition and clearer regulations. Grayscale may believe that its risk-return ratio is no longer attractive. This change signifies that institutional investors have raised their evaluation standards for liquid staking, placing greater emphasis on decentralization, governance transparency, and potential regulatory risks.

Optimism: The Value Capture Challenge of Layer 2

Optimism, as a leading Layer 2 scaling solution for Ethereum, carries the important responsibility of improving transaction efficiency and reducing Gas fees. Its "super chain" vision and OP Stack have attracted several significant projects, including the Coinbase Base chain. However, in terms of TVL and activity, Optimism still lags behind its main competitor, Arbitrum.

The OP token is at the core of governance within the Optimism ecosystem. However, there is controversy regarding its income distribution model: currently, the income of the sequencer goes to the Optimism Foundation to fund public goods, rather than being directly distributed to token holders. Although changes are expected in the future, this uncertainty impacts the direct value capture of the token, causing institutional investors to have concerns.

In addition, Optimism's governance practices also face challenges. The voting participation rate is low, and the core team has a significant influence on the voting process, which is still a distance away from its commitment to "decentralization."

Optimism has been removed from the Grayscale list, reflecting institutional doubts about its token value capture mechanism. A grand ecological vision cannot directly translate into clear token value. In the face of fierce competition in Layer 2, Grayscale may believe that OP is unlikely to provide more attractive risk-adjusted returns in the short term. This change indicates that institutions are conducting a deeper evaluation of Layer 2 token economics: mere technological leadership is insufficient to support long-term value; tokens must have a clear, sustainable value capture mechanism and genuine decentralized governance.

New Trends in Crypto Investment for 2025

The changes in the Grayscale rankings depict a new landscape for institutional investment in the crypto market in 2025:

1. Institutional funds are shifting from a pure "Bitcoin faith" to "diversified allocation" and "application scenario landing". The inclusion of Avalanche and Morpho is a reflection of this trend.

2. DeFi is undergoing an evolution from "barbaric growth" to "refined development". Technologies such as Layer 2 and AI/ML are addressing industry pain points and improving efficiency. Yield-bearing stablecoins and embedded finance have enriched product forms and seamlessly integrated with traditional finance.

3. The competition in Layer 2 has shifted to a comprehensive contest of "ecosystem building capabilities" and "token value capture models." The exit of Optimism indicates that even with grand ecological visions, it is difficult to gain long-term institutional favor if the token value capture mechanism is not clear enough.

4. The clarification of regulations has become a key catalyst for institutional large-scale entry into the crypto market, and it also serves as a precise filter. Compliance has upgraded to become the "ticket" for attracting institutional capital.

Conclusion

The core investment logic for the crypto market in 2025 can be summarized as:

• Application-driven Layer 1/Layer 2: The future belongs to public chains and scalability solutions that can attract a large number of users and enterprise-level applications through technological innovation.
• Institutional-level DeFi infrastructure: The 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 must 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.

In 2025, the crypto market is transitioning from "barbaric growth" to "refined cultivation". Only by understanding the structural changes behind this can we seize future opportunities.