According to RedStone's latest research report, currently only 8%-11% of crypto assets are generating returns, which shows a gap of 5-6 times compared to the 55%-65% return penetration rate of traditional finance. Although the crypto world has established a complete income infrastructure—including staking on Ethereum and Solana, interest-generating stablecoins, DeFi lending protocols, and tokenization of government bonds—lack of risk transparency has deterred institutional funds. Analysts point out that resolving the issues of risk measurement and standardization of disclosures is key to unlocking trillions in incremental funds.
Current Status and Scale Estimation of the Encryption Yield Market
RedStone's research shows that based on the current total cryptocurrency market value of $3.55 trillion, the scale of income-generating assets is approximately between $300 billion and $400 billion. This statistic covers all cryptocurrency assets that generate positive cash flow through staking, lending, liquidity provision, and other means, but it should be noted that the actual scale may be lower than the statistical value due to some staked assets being counted multiple times (e.g., stETH being deposited again into DeFi protocols).
Compared to traditional finance, the proportion of yielding assets in the bond market exceeds 90%, while the proportion of income generated through dividends in the stock market is about 40%, and even money market funds are almost entirely yielding assets. This stark disparity is not due to a lack of income opportunities in the crypto market—Ethereum staking yields an annualized rate of about 3.8%, high-quality DeFi protocols can offer stablecoin yields often reaching 5%-8%, and the yield on tokenized government bonds is also close to 4.5%, which is not inferior to traditional financial products.
The lack of risk transparency constitutes a core bottleneck
The key factor hindering institutional capital entry is not the yield level, but the lack of standardized risk assessment. In the TradFi sector, investors can compare risk-adjusted returns of different yield products through tools such as credit ratings, prospectuses, stress testing frameworks, and liquidity grading. However, the crypto market currently mainly relies on annualized yield rankings and total locked value dashboards. These indicators show the sources of yield but do not reveal the underlying risks.
Specifically, crypto yield products face three major transparency challenges: First, similar yields hide different risk attributes; for example, a 5% staking ETH yield involves liquidity risk, penalty risk, and smart contract risk, while a 5% stablecoin yield mainly relies on reserve asset credit risk, making direct comparison impossible. Second, asset quality disclosure is inconsistent; although DeFi protocols publish collateral ratios and liquidation thresholds, re-collateralization tracking requires a combination of on-chain evidence and off-chain custody reports. Third, the operational risks associated with oracle and validator dependency are rarely quantified and disclosed.
Comparison of Encryption and Traditional Finance Yield Penetration Rates
Cryptocurrency market yield asset ratio: 8%-11%
Traditional financial market yield asset ratio: 55%-65%
Cryptographic income asset scale: 30-40 billion USD
Total market capitalization: $3.55 trillion
Main sources of encryption income: stake, DeFi lending, interest-bearing stablecoins
Main sources of TradFi income: bond interest, stock dividends, money market fund income.
Regulatory policies as catalysts rather than solutions
The GENIUS Act, passed in the United States in 2025, establishes a federal regulatory framework for payment stablecoins, requiring 100% reserve backing and inclusion under the Bank Secrecy Act regulations. This clarity in policy directly stimulates a 300% year-on-year growth in the scale of interest-bearing stablecoins, a segment that had long stagnated during periods of regulatory uncertainty. It is noteworthy that the Act does not mandate risk transparency disclosures but instead eliminates the binary question of “legitimacy” by clarifying reserve composition and compliance requirements.
This regulatory dynamic confirms a rule: regulations reduce uncertainty, but institutions still need more comprehensive risk indicators before expanding their allocations. Just as the U.S. SEC welcomed a large influx of institutional funds after implementing standardized disclosure systems in the 1970s, the encryption market is also undergoing a similar period of infrastructure development. Currently, major global regulatory frameworks such as the EU's MiCA regulations and Hong Kong's VASP licensing system are all in progress, but the standardization of risk measurement still lags behind entry regulations.
Technical Challenges in Building a Risk Measurement Layer
In theory, the transparent nature of blockchain should make risk measurement easier to achieve, but the complexity in practice far exceeds expectations. When staked ETH is wrapped and deposited into lending protocols, and then reused as collateral, the total locked value metrics are recalculated, leading to an inflated proportion of “yield-bearing assets.” Traditional finance strictly distinguishes between principal and derivative risk exposure through accounting rules, while the crypto ecosystem needs to establish a new analytical framework for on-chain and off-chain data integration.
The technical team is breaking through from three dimensions: establishing a cross-protocol risk scoring system, developing collateral traceability tools, and building validator concentration warning indicators. For example, Credmark is attempting to quantify smart contract risks into a score of 1-100, Arbol is focused on developing a re-collateral tracking protocol, while the stress testing model provided by Gauntlet has already been partially adopted by mainstream protocols like Compound and Aave. The level of sophistication of these infrastructures will determine the speed at which institutional funds enter the market.
The Reference Significance of the TradFi Risk Framework
Traditional finance has built a comprehensive risk assessment system over nearly a century, and the cryptocurrency market can draw important lessons from this. In terms of credit ratings, agencies like Moody's and S&P intuitively present default probabilities through letter grades; regarding disclosure systems, SEC Form 10-K requires publicly listed companies to comprehensively disclose business risks; in terms of stress testing, the Federal Reserve conducts extreme scenario simulations on large banks annually. These standardized tools enable institutional investors to compare the risk-return characteristics of corporate bonds against municipal bonds, stocks against REITs within a unified framework.
For the crypto market, the top priority is to establish comparable risk-adjusted return metrics. For example, dividing the yield from staking ETH by the smart contract risk score, or deducting the custodial risk discount from stablecoin yield. Such standardized metrics will allow cautious investors, such as pension funds and insurance companies, to objectively assess the allocation value of crypto yield products, just like comparing government bonds with corporate bonds.
Innovation in Yield Products and Market Evolution
Despite the challenges of transparency, the crypto yield market has formed a complete product matrix. From the risk spectrum perspective, staking blue-chip assets (such as ETH, SOL) offers variable returns, interest-earning stablecoins (such as USDC.e, DAI.savings) provide dollar-denominated interest income, and tokenized government bonds (such as OUSG, TBLL) simulate traditional fixed-income products. In addition, DeFi lending protocols provide floating interest rates based on asset supply and demand, while structured products like Opyn options vaults offer risk-tiered returns.
A significant trend in 2025 is the rise of Real Yield protocols, which distribute dividends to Token holders through real income such as trading fees and blockchain service fees, rather than creating false yields through inflation models. The real yield models of projects like GMX and SNX have attracted the attention of traditional hedge funds, and this fundamental-based valuation method aligns better with institutional investment logic.
Guide for Individual Investors to Participate in Profit Strategies
For individual investors, participating in cryptocurrency yield strategies must adhere to three principles: risk identification, diversification, and continuous monitoring. It is recommended to divide the investment portfolio into three tiers: core allocation choosing time-tested protocols (such as Ethereum staking, Aave lending), satellite allocation experimenting with innovative but controllable risk products (such as LP market making, options selling strategies), and experimental allocation limited to within 5% of total assets (such as emerging protocol mining).
It is particularly important to avoid three common traps: pursuing unsustainable high returns (usually accompanied by Ponzi structures), over-relying on a single protocol (such as depositing most assets into a certain lending platform), and neglecting gas fees and tax costs. It is recommended to use DeFi yield aggregators to monitor annualized returns, while subscribing to smart contract audit reports and protocol governance updates to adjust positions in a timely manner.
Institutional Entry Paths and Market Prospects
When the issue of risk transparency is addressed, institutional entry may go through three stages: first, hedge funds and family offices will test the waters through customized solutions; next, private banks and wealth management platforms will incorporate cryptocurrency yield products into their allocation recommendations; finally, pension funds and insurance companies will make strategic allocations with regulatory approval. Currently, we are in the transitional period from the first stage to the second stage, with institutions such as UBS and Morgan Stanley beginning to provide high-net-worth clients with access to cryptocurrency yield products.
According to the traditional financial penetration rate curve, if the risk transparency of crypto yield products significantly improves in 2026-2027, institutional capital inflows could raise the proportion of yield assets to 30%-40% before 2030, corresponding to hundreds of billions of dollars in incremental capital. This process will reshape the structure of the crypto market, transforming yield generation from a “speculative byproduct” to a “core source of value.”
Industry Reflection
When an 8% yield penetration rate stands alongside a 55% traditional benchmark, what we see is not the failure of the encryption market, but its immense potential. The RedStone report serves as a mirror, reflecting the critical turning point of the industry from infrastructure frenzy to refined operations. It is worth pondering that when Wall Street's earliest telephone lines were laid, and when the initial TCP/IP protocol of the internet was established, similar pains of standardization were experienced. History tells us that the true hindrance to innovation has never been technological bottlenecks, but rather the lack of trust mechanisms — and this time, the encryption industry is constructing its own era of trust with code and consensus.
