ENA surges: Grayscale DeFi Fund's fourth-largest holding, has the institutional allocation trend changed?

In early May 2026, Grayscale completed its quarterly rebalancing of its crypto industry fund, during which the DeFi fund included Ethena in its portfolio while removing Aerodrome Finance, sparking widespread discussion in the market about the directional shift in institutional asset allocation strategies.

As the world’s largest digital asset management platform by assets under management, Grayscale’s quarterly position adjustments are not only routine internal rebalancing but also reflect the underlying logic of institutional-grade capital when selecting DeFi and infrastructure assets. In this rebalancing, Ethena with a 13.59% weight directly became the fund’s fourth-largest holding, while Aerodrome, which was only added in Q3 2025, was completely removed.

What specific changes occurred in the DeFi and smart contract funds during this rebalancing

This adjustment covers Grayscale’s DeFi fund and smart contract fund, both following the CoinDesk index methodology. In the DeFi fund, Grayscale sold off Aerodrome Finance and other existing assets, reallocating the proceeds into Ethena. The post-rebalancing holdings are: Uniswap (UNI, 35.22%), Aave (AAVE, 21.36%), Ondo Finance (ONDO, 19.83%), Ethena (ENA, 13.59%), with Curve DAO and Lido DAO accounting for 5.27% and 4.73%, respectively.

For the smart contract fund, there were no new additions or removals this quarter; only reweighting of existing assets. Ethereum (ETH) regained the top position with 30.14%, followed closely by Solana (SOL) at 29.69%, together forming about 60% of the core holdings; Cardano (ADA) accounts for 17.96%, with Avalanche (AVAX), Hedera (HBAR), and Sui (SUI) at 7.69%, 7.41%, and 7.11%, respectively.

What is the rationale behind Ethena entering the DeFi fund with a 13.59% weight

Ethena, with a 13.59% weight, became the DeFi fund’s fourth-largest holding, a proportion significantly higher than the approximately 5.36% weight of Aerodrome, which was removed earlier. This leap in weight indicates Ethena entered the fund on a strong footing, reflecting a comprehensive assessment of the asset’s true market depth during index compilation.

Ethena’s core narrative is a synthetic dollar protocol. Unlike fiat-backed or over-collateralized stablecoins, Ethena’s USDe achieves value anchoring through a core stablecoin mechanism—holding crypto assets while establishing corresponding short positions in derivatives markets, creating a hedge structure between spot and derivatives to minimize price volatility risk. This mechanism offers higher capital efficiency than traditional over-collateralized stablecoins and extends stablecoins from simple mediums to assets with yield mechanisms.

From a fundamental perspective, Ethena demonstrated key advancements in its economic model in 2026. In Q1 2026, the risk committee confirmed preset parameters for the fee switch mechanism, enabling ENA to transition from a governance token to a yield-generating asset. Governance updates showed that the total supply of USDe remained around $6.07 billion at the end of February, with $3.53 billion staked, a staking ratio of 57.96%, and an APY of 3.59% for staked USDe tokens, consistently higher than yields on other mainstream stablecoins under current market conditions.

These factors collectively meet the criteria for Ethena to be included in the CoinDesk DeFi Select Index based on market capitalization weighting. Once the index incorporated this new asset, Grayscale’s quarterly rebalancing was executed accordingly, leading to ENA’s inclusion in the institutional-grade DeFi portfolio.

Does the removal of Aerodrome reveal the criteria institutions use to select DeFi projects?

Aerodrome Finance (AERO) was only added to Grayscale’s DeFi fund in Q3 2025, replacing MakerDAO (MKR), with a weight of about 6.60%. However, just two quarters later, AERO was fully removed from the portfolio, with a weight of approximately 5.36% at removal. This pace itself signals an important point: index-tracking funds strictly adhere to thresholds related to liquidity, custody feasibility, and market cap stability. If a project’s quarterly performance shows marginal deterioration in these quantitative dimensions, it may trigger removal.

In the current evaluation cycle, some operational metrics of Aerodrome may no longer meet the inclusion criteria for the CoinDesk DeFi Select Index. Although the official press release did not disclose specific quantitative reasons for removal, the standardized process suggests that institutional asset screening generally considers whether DeFi assets can maintain specified liquidity depth, custody compliance, and responsiveness to market events—factors essential for remaining in the index.

Furthermore, the quarterly rebalancing system itself embodies a process of natural selection. For institutional funds, periodic recalibration serves both as routine operation and as a stress test of project fundamentals.

What does Ethereum regaining the top position in the smart contract fund indicate?

In this quarter’s rebalancing, Grayscale’s smart contract fund maintained its existing asset structure but saw a significant weight shift. Ethereum (ETH) with 30.14% overtook Solana (SOL) at 29.69% to become the largest holding. This is the first time since Q4 2025, when SOL led ETH, that ETH has reclaimed the top spot in Grayscale’s smart contract fund.

The roughly 0.45 percentage point difference between ETH and SOL reflects a balanced strategy in layered allocations. Under the 2026 market landscape, the fund continues to follow a market cap-weighted cap approach, meaning the relative performance of the two main ecosystems—including on-chain activity, decentralized application deployment, transaction throughput, and stablecoin deposits—directly influences their dynamic weightings. The current configuration indicates that institutions have not abandoned high-throughput scenarios like Solana nor reduced the value derived from Ethereum’s security and ecosystem depth.

Additionally, the fund maintains a “diversified allocation” feature with Cardano, Avalanche, Hedera, and Sui ranked third to sixth, ensuring risk dispersion across infrastructure layers.

How do the fundamental ecosystem data of Ethena relate to this rebalancing?

In early 2026, despite market volatility causing USDe supply to contract from its peak, the supply stabilized around $4.28 billion after redemption pressures eased at the end of April. The protocol’s debt ratio remained at 101.11%, with a reserve fund of approximately $62.5 million, indicating the protocol’s ability to maintain over-collateralized solvency under stress conditions.

Staking data show active participation. The staked USDe supply reached 3.53 billion tokens early in 2026, with a staking ratio close to 58%. After the fee switch mechanism completed protocol compliance audits and is activated, ENA will directly capture protocol revenue streams, forming a more complete value capture model. Ethena has also expanded its white-label stablecoin products across multiple blockchain environments, with cross-ecosystem circulating supply surpassing $100 million for the first time at the start of the year. The continued improvement or stable maintenance of these underlying fundamentals is crucial for ENA to meet the inclusion thresholds in the index’s quarterly assessment.

Is the asset allocation of institutions undergoing a structural shift?

From a macro perspective, institutional capital in crypto is shifting from “broad exploration” to “strategic deepening.” For example, in Q1 2026, DeFi funds significantly increased allocations to assets with real yield and stablecoin infrastructure attributes. Positions concentrated in staked assets (Lido DAO), on-chain lending (Aave), stablecoin liquidity infrastructure (Curve), and tokenized asset financing (Ondo), with the recent addition of Ethena reinforcing the “yield-oriented stable asset” category.

Similarly, the smart contract fund maintained its overall asset structure but through rebalancing of weights, demonstrating a strategic intent by institutions to balance investments across major infrastructure projects. Both fund lines point to a trend: institutional focus is shifting from early-stage ecosystem locking to assets with mature product-market fit, verifiable economic models, and sustainable income potential.

Does this rebalancing indicate a new directional shift in strategic asset deployment?

Grayscale’s quarterly rebalancing essentially follows the methodology of the CoinDesk index, reflecting not only Grayscale’s preferences as a single manager but also broader institutional standards for “investable assets.” Based on this, it can be inferred that in the near future, institutional focus in DeFi will emphasize three key dimensions:

First, innovation in stablecoin infrastructure. Ethena’s inclusion indicates that synthetic dollar models based on delta-neutral strategies are now within mainstream institutional attention.

Second, diversification and sustainability of yield sources. Whether from staking yields, lending interest, or decentralized trading fee sharing, DeFi protocols with sustainable cash flow structures are differentiating themselves from purely governance tokens.

Third, compliance and indexability thresholds as early advantages. DeFi assets that can meet liquidity, custody, transparency, and cross-cycle stability requirements will gain earlier institutional recognition.

Summary

Grayscale’s Q1 2026 rebalancing exemplifies a data-driven adjustment: Ethena’s 13.59% inclusion in the DeFi fund replacing Aerodrome reflects that institutional capital is shifting the logic from DEX trading fee models to stablecoin infrastructure. The return of ETH as the top holding in the smart contract fund indicates a balanced approach at the infrastructure layer. Coupled with recent survey data showing nearly 80% of institutions plan to allocate to digital assets, this helps the market understand the underlying metrics guiding institutional asset selection.

Frequently Asked Questions (FAQ)

Q1: Why does Ethena have such a high weight of 13.59%, rather than a small trial position?

A: Grayscale DeFi Fund follows the CoinDesk DeFi Select Index’s market cap weighting methodology. Ethena’s market size, liquidity, and custody accessibility during the evaluation period collectively determine its index weight. During rebalancing, assets are purchased proportionally according to the index, so there is no “trial” phase based on valuation adjustments.

Q2: Does the complete removal of Aerodrome Finance indicate major fundamental issues with the project?

A: The removal follows the index methodology’s quantitative thresholds, including sustained trading volume, liquidity, custody feasibility, and market cap stability. The official announcement did not specify exact reasons, so it cannot be directly concluded that the project’s fundamentals have deteriorated. However, the removal does reflect that the project failed to meet certain criteria in this evaluation cycle.

Q3: The ETH and SOL weights in the smart contract fund are very close—does this suggest differing institutional views?

A: The approximately 0.45 percentage point difference indicates a balanced allocation strategy. It reflects a nuanced view that both ecosystems are valuable, with slight differences in on-chain activity, DApp deployment, throughput, and stablecoin deposits. This close distribution suggests no decisive preference, and both assets are expected to coexist in the portfolio long-term.

Q4: Does this rebalancing signal an expansion of institutional allocations into DeFi?

A: Nearly 66% of institutions express clear expectations to participate in DeFi. Grayscale’s index-driven quarterly rebalancing provides a reference framework for asset selection, but given the relatively limited size of the fund’s net asset value and total assets under management, this event mainly indicates a change in screening standards rather than a large influx of capital.