DeFi Capital Flows Shift Toward Institution-Friendly Assets, Says Tiger Research

A new report from Asian Web3 research and consulting firm Tiger Research reveals a notable shift in capital allocation within the decentralized finance (DeFi) sector. According to the firm, funds are increasingly moving away from high-yield assets and toward 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 movement does not represent a broad capital exodus from the DeFi market. Instead, it reflects a change in how investors evaluate digital assets. Tiger Research states that annual percentage yield (APY) is no longer the primary driver of asset selection. Growing importance is being placed on an asset’s potential for adoption as collateral, integration into savings products, or use in institutional reserves.

This shift suggests that the market is maturing, with participants prioritizing stability and utility over raw returns. The report notes that assets like USYC and sUSDS are gaining traction precisely because they offer lower volatility and clearer pathways for institutional use.

Ethena’s sUSDe and the Role of Institutions

The report dedicates significant attention to the stability of Ethena’s sUSDe, a synthetic dollar token that has seen a reduction in circulating supply. Tiger Research analyzes the delta-neutral strategies underpinning such assets, which aim to maintain a stable value while generating yield. The firm also examines the role of real-world assets (RWAs) in providing a more predictable foundation for yield-bearing stablecoins.

Institutional involvement is identified as a key factor driving this evolution. As traditional financial entities explore digital asset exposure, their preference for assets with established collateral frameworks and transparent underlying mechanisms is reshaping market dynamics. This contrasts with earlier DeFi cycles where retail demand for high APY often dominated.

What This Means for the Broader Market

For everyday DeFi participants, this trend signals a potential reduction in the availability of ultra-high-yield 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 monitor how protocols like Ethena adapt their offerings to meet institutional standards, as this will likely influence 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 yield to practical utility and stability. As the market continues to evolve, the ability of yield-bearing stablecoins to serve as reliable collateral and reserve assets will be critical. This report provides valuable context for understanding the changing landscape of digital asset investment.

FAQs

Q1: 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 underlying real-world assets or delta-neutral strategies, offering a more stable alternative to high-yield DeFi tokens.

Q2: Why is the supply of sUSDe declining?
The supply of sUSDe, issued by the Ethena protocol, has declined as capital rotates toward assets perceived as more institution-friendly. Tiger Research notes this reflects a broader shift in selection criteria rather than a loss of confidence in the protocol itself.

Q3: How does this shift affect regular DeFi investors?
Regular investors may see fewer opportunities for extremely high yields, but the market is becoming more stable and less prone to extreme volatility. Assets that prioritize collateral utility and reserve suitability offer a safer foundation for long-term participation in DeFi.