A new report from Asian Web3 research and advisory firm Tiger Research reveals a notable shift in capital allocation within the decentralized finance (DeFi) sector. According to the company, funds are increasingly shifting from high-yield assets to lower-yielding, institution-friendly alternatives such as USYC and sUSDS. This trend comes amid a sharp decline in the supply of sUSDe, a yield-bearing token from the Ethena protocol.
Selection criteria evolve beyond APY
The report emphasizes that this move does not represent a broad exodus of capital from the DeFi market. Instead, it reflects a change in the way investors evaluate digital assets. Tiger Research says annualized rate of return (APY) is no longer the primary driver of asset selection. Increasing importance is being attached to the potential of assets to be used as collateral, for integration into savings products or for use in institutional reserves.
This shift signals that the market is maturing, with participants valuing stability and practicality over raw returns. The report notes that assets like USYC and sUSDS are gaining popularity precisely because they offer lower volatility and clearer opportunities for institutional use.
Ethena’s USDe and the role of institutions
The report focuses heavily on the stability of Ethena’s sUSDe, a synthetic dollar sign that has seen a reduction in circulating supply. Tiger Research analyzes the delta-neutral strategies underlying such assets, which aim to maintain stable value while generating returns. The company is also exploring the role of real-world assets (RWAs) in providing a more predictable foundation for yield-bearing stablecoins.
Institutional commitment is identified as a key factor driving this evolution. As traditional financial entities explore exposure to digital assets, their preference for assets with established collateral frameworks and transparent underlying mechanisms is once again changing market dynamics. This contrasts with previous DeFi cycles, where retail demand for high APY often dominated.
What this means for the broader market
For mainstream DeFi participants, this trend signals a potential reduction in the availability of ultra-high return opportunities. However, it also points to a healthier, more sustainable market structure. The focus on assets suitable for reserves and savings products aligns with the long-term goal of integrating digital assets into the global financial system. Investors should keep an eye on how protocols like Ethena adapt their offerings to institutional standards, as this will likely impact the next phase of DeFi growth.
Conclusion
Tiger Research’s findings highlight a pivotal moment for the DeFi sector. The movement of capital toward institution-friendly assets underscores a shift in priorities from speculative returns to practicality and stability. As the market continues to evolve, the ability of interest-bearing stablecoins to serve as reliable collateral and reserve will be critical. This report provides valuable context for understanding the changing landscape of digital asset investing.
Frequently asked questions
Question 1: What are USYC and sUSDS?
USYC and sUSDS are yield-bearing stablecoin assets designed for lower volatility and greater institutional compatibility. They generate returns through real-world underlying assets or delta-neutral strategies, offering a more stable alternative to high-yield DeFi tokens.
Question 2: Why is the supply of sUSDe decreasing?
The supply of sUSDe, issued by the Ethena Protocol, has declined as capital moves into assets considered more institution-friendly. Tiger Research notes that this reflects a broader shift in selection criteria rather than a loss of confidence in the protocol itself.
Question 3: How will this shift impact mainstream DeFi investors?
Regular investors may see fewer opportunities for extremely high returns, but the market is becoming more stable and less prone to extreme volatility. Assets that prioritize the usefulness of collateral and the adequacy of reserves provide a more secure foundation for long-term participation in DeFi.