Grayscale Adds AVAX & MORPHO, Drops LDO, OP From Top Holdings

Grayscale’s latest Top 20 update isn’t just a reshuffle. It’s a signal. The list reflects the crypto tokens Grayscale views as most investable.

It’s a set tracked across its institutional products and research benchmarks, shaping how funds and investors allocate capital.

While Avalanche (AVAX) and Morpho (MORPHO) earned new spots for their growing fundamentals, two major Ethereum ecosystem players, Lido DAO (LDO) and Optimism (OP), were removed.

Despite leading their categories, both tokens fell short on near-term momentum and token value capture. Grayscale’s move hints at a pivot toward adoption metrics over long-term alignment.

AVAX Rises on Institutional Tailwinds, Not Fundamentals Alone

Avalanche’s inclusion in Grayscale’s Top 20 reflects rising narratives more than current on-chain metrics.

Despite a 3.4% intraday pullback this week, AVAX has seen a 275% surge in daily transactions since May, largely driven by institutional interest in tokenizing real-world assets (RWAs).

One example is Republic’s “Republic Note”, a profit-sharing RWA launched on Avalanche, underscoring its appeal for revenue-bearing assets.

Even with volatile price action, Avalanche’s inclusion appears driven more by institutional momentum, like the buzz around AVAX ETFs, than trading spikes.

Grayscale’s move points to a shift toward real-world use cases and network utility over short-term speculation.

Optimism Gets Dropped from Grayscale 20; Despite L2 Dominance

Optimism’s exclusion from the Grayscale Top 20 is less a rejection of Layer 2s and more a referendum on short-term value accrual.

Even as OP powers major Ethereum scaling ecosystems, including Coinbase’s Base, Worldcoin, and Uniswap’s Unichain, it failed to convert network growth into token upside.

Fee capture on OP Mainnet remains negligible, and Grayscale likely weighed this misalignment between ecosystem dominance and token performance.

The drop suggests that Grayscale favors direct value attribution, not just long-term protocol importance.

With Ethereum’s scaling roadmap already priced in, assets like OP may face a steeper road to staying in flagship indices without clearer token capture.

Morpho’s Rise Reflects a Growing Preference for Clean Token Design

Grayscale Top 20’s inclusion of Morpho, alongside AVAX, reinforces the signal: Grayscale is backing clean, efficient DeFi protocols with well-designed value accrual mechanisms.

Morpho’s recent traction, including growth in Katana yield strategy adoption and consistent capital efficiency improvements, reflects a shift toward minimalist, modular DeFi over governance-heavy legacy players like Lido.

The absence of LDO underscores this thesis. As centralized staking competition heats up and regulatory scrutiny looms, token-heavy DAO structures may now be seen as bloated rather than innovative.

From Fees to Flows: Sector Preferences Are Shifting

Grayscale’s latest sector breakdown shows Smart Contract Platforms and Financials outperforming, while Application Layer and Utility tokens faltered. In Q2 2025:

• Smart Contract Platforms posted a 12% return
• Financials returned 8%
• Consumer & Culture declined 9%
• Utilities & Services fell 11%

This reshuffle of the Grayscale Top 20 comes into sharper focus when seen through sector performance. Ethereum-aligned apps, largely driving the Consumer, Culture, and Utility segments, struggled with fee compression and slowing growth.

Meanwhile, token-driven platforms like Avalanche and Morpho posted stronger results. It’s not just about token swaps; it’s about where investor conviction is headed.

Grayscale appears to be backing sectors with clearer value signals and stronger institutional narratives this cycle.

At its core, the Q3 update rewards near-term alignment with momentum, ecosystem activation, and token-level value clarity.

Long-term dominance, as seen in OP and LDO, is no longer enough if tokens don’t reflect usage or capture upside.

As crypto’s capital allocators grow more selective, the threshold for flagship inclusion is shifting. Being critical of Ethereum is important, but only if the token itself earns its place.

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