In today’s “Crypto for Advisors” newsletter, Lionsoul Global’s Gregory Mall breaks down the performance of cryptocurrencies and highlights their maturity, along with their role in a portfolio. We look at why yield may ultimately become cryptocurrencies’ most durable bridge to mainstream wallets.
Then, in “Ask an Expert,” Kevin Tam highlights key investments from recent 13F filings, including news that the UAE’s combined sovereign exposure reached $1.08 billion, making it the fourth-largest global holder.
Digital asset performance: What advisors need to know as the market matures
For most of their history, cryptocurrencies have been defined by directional bets: buy, hold, and wait for the next cycle to happen. But beneath the surface a quieter transformation has been unfolding. As the digital asset ecosystem has matured, one of its most important and misunderstood developments has been the emergence of yield: systematic, programmatic, and increasingly institutional.
The story begins with infrastructure. Bitcoin introduced self-custody and scarcity; Ethereum expanded that foundation with smart contracts, turning blockchains into programmable platforms capable of running financial services. Over the past five years, this architecture has given rise to a transparent and parallel credit and trading ecosystem known as decentralized finance (DeFi). While still niche relative to traditional markets, DeFi has grown from less than $1 million in total value locked in 2018 to over $100 billion at its peak (DefiLlama). Even after the slowdown in 2022, activity has recovered markedly.
For advisors, this expansion is important because it has unlocked something that cryptocurrencies rarely offered in their early years: returns based on cash flow, not dependent on speculation. But the complexity behind those returns and the risks beneath the surface require careful navigation.
Where crypto performance comes from
The performance of digital assets does not come from a single source, but from three broad categories of market activity.
1. Negotiation and liquidity provision
Automated market makers (AMMs) generate fees every time users trade tokens. Liquidity providers earn a portion of those fees, similar to market-making spreads in traditional finance. At scale, and in sufficiently deep pools, this can generate stable income, although exposure to “non-permanent losses” must be monitored.
2. Rate markets and collateralized loans
On-chain protocols allow users to borrow against their assets without intermediaries. Borrowers pay interest; the lenders earn it. This dynamic creates opportunities for interest rate arbitrage (borrowing at one rate, lending at another) and for delta-neutral yield strategies when exposures are hedged.
3. Financing, volatility and derivative settlements
Perpetual swap markets generate funding rates that can be captured through neutral market positioning. Similarly, options vaults and structured payments can systematically monetize volatility. Liquidation auctions, in which collateral for undersecured loans are sold, also provide opportunities for sophisticated participants.
It is important to note that these are not “magical” returns. They arise from economic activity: trading, demand for leverage and provision of liquidity.
The risks below the surface
Despite its promise, DeFi is still far from being plug-and-play for fiduciaries.
The technical risk remains the most visible. Smart contract exploits, oracle manipulation, and bridge hacks have together caused billions in losses. The Ronin Bridge compromise, for example, resulted in one of the largest thefts in cryptocurrency history.
Regulatory complexity is equally significant. Most DeFi platforms operate with limited or no “know your customer” processes or other anti-money laundering (AML) or sanctions safeguards, making them inaccessible or inappropriate for many wealth management clients.
And perhaps what is most overlooked: the economic risk. Many DeFi returns remain subsidized by governance token issuances, which is attractive but structurally unsustainable. The saying is true: if you don’t understand where performance comes from, you are the performance.
What advisors should think about
1. Demand is shifting from directional exposure to income.
As the asset class matures, many clients want to participate without adopting high beta.
2. Not all returns are equal.
Token-incentivized returns and economic-based returns are fundamentally different.
3. Operational due diligence is everything.
Smart contracts can be executed autonomously, but the surrounding infrastructure (custody, valuation, compliance, audit) is what makes the strategies investable for high net worth and institutional clients.
4. Yield may ultimately become the bridge from cryptocurrencies to conventional wallets.
In the same way that money markets underpin traditional finance, transparent and programmatic performance mechanisms may become the most enduring institutional feature of cryptocurrencies.
If you want to read more about Yield Generation DeFi, please visit us to continue reading.
– Gregory Mall, Chief Investment Officer, Lionsoul Global
ask an expert
Q: How is Canada’s largest globally systemically important bank investing in bitcoin?
TO: Royal Bank of Canada increased its bitcoin exchange-traded products (ETP) position from 35,000 to 1.47 million shares, an increase of 4,104 percent, while exposure to the dollar increased to $102 million, representing an increase of 4,363 percent. Additionally, RBC increased its Strategy (MSTR) stock position by 561 percent, bringing dollar exposure to $504 million, making it one of the largest Canadian bank’s bitcoin proxy positions.
Q: Beyond exchange-traded funds (ETFs), how are Canadian institutions interacting with other digital assets?
TO: The Canada Pension Plan Investment Board (CPPIB) added 393,322 shares of Strategy (MSTR) valued at $127 million. This marks a milestone as the first major Canadian pension fund to gain indirect exposure to bitcoin through MSTR.
Q: What are the notable developments in the third quarter of 2025?
TO: The Harvard University endowment dramatically expanded its position in the iShares Bitcoin Trust in the third quarter of 2025, going from 1.91 million shares to 6.81 million, an increase of 258 percent, representing $443 million.
The UAE’s combined sovereign exposure reached $1.08 billion. It is the fourth largest global holder after US institutions. Al Warda Investment RSC Ltd. significantly expanded its iShares Bitcoin Trust by 230 percent to 7.96 million shares, for a total of $518 million. Mubadala Investment Corporation added a new position valued at $567 million.
Looking ahead, the expected rate cuts and maturation of the ETP infrastructure mark bitcoin’s ultimate transition from a speculative asset to an institutional reserve component. The combination of regulatory clarity, sovereign wealth fund deployment and grant participation lays the foundation for sustained institutional adoption.
Sources: SEC filings, Nasdaq, FactSet.
– Kevin Tam, Digital Asset Research Specialist
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