In today’s “Crypto for Advisors” newsletter, Lionsoul Global’s Gregory Mall breaks down the performance of crypto, highlighting its maturity, as well as its role in a portfolio. We examine why yield could ultimately become the most sustainable bridge between cryptocurrencies and traditional wallets.
Then, in “Ask an Expert,” Kevin Tam highlights key investments from recent 13F filings, including the news that the UAE’s combined sovereign exposure has reached $1.08 billion, making it the world’s fourth-largest holder.
Digital Asset Performance: What Advisors Should Know as the Market Matures
For most of its history, crypto has been defined by directional bets: buy, hold, and hope the next cycle delivers. But a more discreet transformation is taking place beneath the surface. 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 has extended this foundation with smart contracts, transforming blockchains into programmable platforms capable of running financial services. Over the past five years, this architecture has given rise to a parallel and transparent credit and exchange ecosystem known as decentralized finance (DeFi). While still niche compared to traditional markets, DeFi has grown from less than $1 million in total value locked in 2018 to well over $100 billion at peak (DefiLlama). Even after the slowdown in 2022, activity has rebounded strongly.
For advisors, this expansion is important because it has unlocked something crypto rarely offered in its early years: returns based on cash flow, not dependent on speculation. But the complexity behind these returns and the risks lurking beneath the surface require careful navigation.
Where does crypto yield come from?
The return on digital assets does not come from a single source but from three broad categories of market activity.
1. Trading and liquidity provision
Automated market makers (AMM) generate fees every time users trade tokens. Liquidity providers receive a share of these fees, similar to market-making spreads in traditional finance. At scale and in sufficiently deep pools, this can generate stable income – although exposure to “fleeting losses” must be monitored.
2. Secured loan and rate markets
On-chain protocols allow users to borrow against their assets without intermediaries. Borrowers pay interest; lenders earn it. These dynamics create opportunities for interest rate arbitrage (borrowing at one rate, lending at another) and delta-neutral yield strategies when exposures are hedged.
3. Financing of derivatives, volatility and liquidations
Perpetual swap markets generate funding rates that can be captured through market-neutral positioning. Likewise, options vaults and structured payments can systematically monetize volatility. Liquidation auctions, in which undersecured loan collateral is sold, also provide opportunities for sophisticated participants.
It is important to note that these are not “magic” returns. They arise from economic activity: trading, demand for leverage and provision of liquidity.
Risks beneath the surface
Despite its promises, DeFi remains far from plug-and-play for fiduciaries.
The technical risk remains the most visible. Smart contract exploits, Oracle manipulation, and bridge hacks collectively accounted for billions in losses. The Ronin Bridge compromise, for example, resulted in one of the largest thefts in crypto history.
Equally important is the complexity of the regulations. 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 the most neglected: economic risk. Many DeFi returns remain subsidized by governance token issuance – attractive but structurally unsustainable. The adage is true: if you don’t understand where performance comes from, you are performance.
What advisors should think about
1. Demand shifts from directional exposure to revenue exposure.
As the asset class evolves, many clients want to participate without taking high beta.
2. Not all returns are equal.
Token-incentivized returns and economically based returns are fundamentally different.
3. Operational due diligence is paramount.
Smart contracts can run autonomously, but the surrounding infrastructure – custody, valuation, compliance, auditing – is what makes the strategies investable for high net worth and institutional clients.
4. Yield could ultimately become crypto’s bridge to traditional wallets.
In the same way that money markets support traditional finance, transparent and programmatic return mechanisms could become crypto’s most enduring institutional feature.
If you want to learn more about DeFi yield generation, visit us for continued reading.
– Gregory Mall, Chief Investment Officer, Lionsoul Global
Ask an expert
Q: How is Canada’s largest global systemically important bank investing in bitcoin?
A: Royal Bank of Canada increased its position in Bitcoin exchange-traded products (ETPs) by 35,000 to 1.47 million shares, an increase of 4,104 percent, while dollar exposure increased to $102 million, an increase of 4,363 percent. Additionally, RBC increased its equity position in the strategy (MSTR) by 561 percent, bringing dollar exposure to $504 million, making it one of the largest Bitcoin proxy positions among Canadian banks.
Q: Beyond exchange-traded funds (ETFs), how do Canadian institutions interact with other digital assets?
A: 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 exposure to bitcoin indirectly through MSTR.
Q: What are the notable developments in the third quarter of 2025?
A: The Harvard University Endowment sharply expanded its iShares Bitcoin Trust position in Q3 2025, from 1.91 million shares to 6.81 million, an increase of 258%, representing $443 million.
Cumulative exposure to UAE sovereign debt reached $1.08 billion. It is the fourth largest holder in the world after American institutions. Al Warda Investment RSC Ltd. significantly expanded its iShares Bitcoin Trust by 230% to 7.96 million shares, totaling $518 million. Mubadala Investment Corporation added a new position valued at $567 million.
Looking ahead, expected rate cuts and maturing ETP infrastructure mark bitcoin’s definitive transition from a speculative asset to an institutional reserve component. The combination of regulatory clarity, deployment of sovereign wealth funds, and participation in endowments provides a basis for sustainable institutional adoption.
Sources: SEC filings, Nasdaq, FactSet.
– Kevin Tam, Digital Asset Research Specialist
Continue reading
Legal notices
The information presented, displayed or otherwise provided is for educational purposes only and should not be construed as investment, legal or tax advice, or as an offer to sell or a solicitation of an offer to buy interests in any fund or other investment product. Access to Lionsoul Global Advisors products and services is subject to the eligibility requirements and the final terms of documents between prospective clients and Lionsoul Global Advisors, as they may be amended from time to time.
