A New Direction in the Crypto Market: Analysis of Grayscale's Q3 Portfolio Adjustments

In the rapidly changing crypto world, the movements of institutional capital often reveal the future development trends of the market. As a leader in the encryption asset management field, Grayscale Investments' quarterly updated Top 20 asset list is undoubtedly an important window to gain insight into the direction of the crypto market from the perspective of institutional investors.

In the third quarter of 2025, Grayscale's portfolio has quietly changed: the new projects Avalanche (AVAX) and Morpho (MORPHO) have made it onto the list, while Lido DAO (LDO) and Optimism (OP) have unfortunately exited. These adjustments reflect the deep transformations that the crypto market is undergoing.

Avalanche: The Rise of High-Performance Public Chains

Avalanche achieves a perfect combination of high throughput, low latency, and decentralization with its innovative "Avalanche Consensus Mechanism" and triple-chain architecture. In 2025, with the Etna upgrade reducing average transaction fees by over 90%, Avalanche's C-Chain transaction volume surged from 250,000 to nearly 1.2 million, fully demonstrating its powerful scalability.

Avalanche not only continues to break through technically but also actively expands its ecosystem. It has made significant progress in the GameFi sector, with games like MapleStory Universe successfully launching on its subnet. Notably, Avalanche's collaborations with Web2 giants such as Amazon Web Services and Alibaba Cloud have accelerated the tokenization of real-world assets, paving the way for the Web3 economy to penetrate the mainstream.

Grayscale's preference for Avalanche reflects the market's recognition of the immense potential of high-performance public chains in gaming, enterprise applications, and the integration of Web3. This also signals that the competition among Layer 1 solutions is shifting to a new track with broader and more practical economic activities and cross-border integration potential.

Morpho: Institutional Transformation of DeFi

Morpho, as a DeFi lending protocol based on the Ethereum and Base chains, is redefining the future of decentralized lending. Through the innovative design of "Morpho Vaults" and isolated markets, Morpho not only optimizes returns but also ensures high security. Its low transaction fees and up to 25 security audits fully reflect its commitment to user interests.

Morpho's performance is impressive: it has generated an annual fee income of $100 million and a total locked value (TVL) of over $4 billion, firmly securing its position as the second-largest DeFi lending protocol. On the emerging Base chain, Morpho is the protocol with the largest TVL and active loan volume. Significant investments from top venture capitalists further validate the market's optimism about its prospects.

Morpho's most significant milestone is its partnership with Coinbase. By integrating Morpho into the main Coinbase application, users can borrow USDC by collateralizing Bitcoin, marking a key step in the institutional adoption of DeFi. The release of Morpho V2 further underscores its commitment to bringing DeFi into traditional financial institutions.

Choosing Morpho reflects institutional investors' preference for projects that can enhance DeFi efficiency, reduce risks, and effectively connect with traditional finance. This also indicates that DeFi is gradually moving from the early "wild growth" stage towards a more mature, standardized, and institutionalized development path.

The Exit of Lido DAO: A Warning of Centralization Risks

Lido DAO was once a giant in the Ethereum liquid staking space, managing about 33% of staked ETH. However, its "permissioned" validator set and control of core privileges through the LDO token have raised concerns about centralization risks. The May 2025 hack of the Chorus One hot wallet further sounded the alarm.

After the Ethereum Shanghai upgrade, users have more staking options, and Lido's advantages in liquidity have been weakened. Emerging non-custodial competitors and restaking innovations, such as EigenLayer, have further intensified market competition.

The removal of Lido reflects the reassessment of centralization risks by institutional investors. Against the backdrop of intensified competition and clearer regulations, the centralization characteristics of Lido are particularly prominent. This change indicates that institutional investors are placing greater emphasis on the degree of decentralization, governance transparency, and potential regulatory risks when evaluating liquid staking projects.

The Challenges of Optimism: The Dilemma of Value Capture in Layer 2

Optimism, as a representative of Ethereum Layer 2 scaling solutions, has attracted many star projects, including Coinbase's Base chain, with its "superchain" vision and OP Stack. However, in terms of TVL and activity, Optimism still lags behind its main competitor, Arbitrum.

The OP token, as the core of the Optimism Collective's decentralized governance structure, has a controversial revenue distribution model. Currently, the income from sequencers is owned by the Optimism Foundation, which funds public goods rather than being directly distributed to OP token holders. This uncertain value capture mechanism raises concerns among institutional investors.

In addition, Optimism's governance practices also face challenges. Low voter participation and the concentration of voting power among the core team create a certain contradiction with its commitment to decentralization.

The removal of Optimism reflects the deepening evaluation of Layer 2 token economics by institutional investors. Merely having technological leadership and grand visions is no longer sufficient to support long-term value; tokens must have clear and sustainable value capture mechanisms and true decentralized governance.

New Trends in Crypto Investment for 2025

1. Diversified allocation of institutional funds: Transitioning from pure Bitcoin investment to a broad allocation of crypto assets including DeFi, GameFi, and enterprise-level applications.

2. The Refined Evolution of DeFi: DeFi is transitioning from the early stage of rapid expansion to a refined development stage that focuses more on efficiency, risk management, and integration with traditional finance.

3. Comprehensive Strength Competition of Layer 2: The competition among Layer 2 projects is no longer limited to technical performance, but also includes the ability to build ecosystems and the design of token value capture models.

4. Compliance has become a key consideration: As the regulatory environment gradually becomes clearer, compliance has become an important "ticket" to attract institutional capital.

Conclusion

The adjustment of Grayscale's Q3 investment portfolio outlines a new landscape for institutional investment in the crypto market by 2025. It emphasizes the importance of technological innovation, practical application scenarios, sustainable value capture models, and effective decentralized governance. For participants in the crypto world, this list provides valuable strategic guidance.

Investors should move beyond short-term speculation and deeply study the fundamentals of the project, technological innovation, ecosystem development, token economics design, and compliance. Project developers need to create a healthy and sustainable economic model while achieving technological breakthroughs, strengthen decentralized governance, and actively explore ways to integrate with the traditional financial world.

In 2025, the crypto market is transitioning from a phase of "barbaric growth" to a new stage of "refined cultivation." Understanding the structural changes behind this will be key to seizing future market opportunities.