In this edition of the “Crypto for Advisors” newsletter, Gregory Mall from Lionsoul Global examines crypto yield, emphasizing its growth and significance in investment portfolios. We discuss why yield could ultimately become crypto’s most resilient connection to mainstream investment strategies.
Following that, in our “Ask an Expert” section, Kevin Tam highlights crucial investments from the latest 13F filings, noting that the total sovereign exposure of the United Arab Emirates reached $1.08 billion, positioning them as the fourth-largest holder globally.
Yield in Digital Assets: Key Insights for Advisors as the Market Matures
Historically, the crypto space has focused primarily on directional investments: buying, holding, and anticipating market cycles. However, a significant transformation has quietly emerged. As the digital asset ecosystem matures, one of the most critical and often misunderstood trends is the rise of yield: systematic, programmatic, and increasingly institutional.
This evolution starts with infrastructure. Bitcoin introduced self-custody and scarcity; Ethereum built upon this foundation with smart contracts, transforming blockchains into programmable systems capable of enabling financial services. Over the last five years, this architecture has birthed a transparent credit and trading system known as decentralized finance (DeFi). While it remains small compared to traditional markets, DeFi has escalated from under $1 million in total value locked in 2018 to over $100 billion at its peak (DefiLlama). Despite the downturn in 2022, activity has rebounded significantly.
This growth is significant for advisors because it has unlocked a feature that crypto seldom provided in its early stages: cash-flow-based returns that do not depend on speculation. However, the intricacies behind these yields and the underlying risks necessitate careful navigation.
Where Crypto Yield Comes From
Yield in digital assets is derived from three primary categories of market activities.
1. Trading and liquidity provision
Automated market makers (AMMs) generate fees each time users exchange tokens. Liquidity providers receive a portion of these fees, akin to the market-making spreads found in traditional finance. When done at scale, and in sufficiently deep pools, this can create stable income, although one must monitor exposure to “impermanent loss.”
2. Collateralized lending and rates markets
On-chain protocols enable users to borrow against their assets without the need for intermediaries. Borrowers pay interest; lenders earn it. These dynamics also provide opportunities for interest-rate arbitrage (borrowing at one rate and lending at another) and delta-neutral yield strategies when hedge exposures are in place.
3. Derivatives funding, volatility, and liquidations
Perpetual swap markets generate funding rates that can be utilized through market-neutral positions. Similarly, options vaults and structured payoffs can systematically capitalize on volatility. Liquidation auctions, where collateral from under-secured loans is sold, also present opportunities for sophisticated participants.
It’s important to note that these yields are not “magical.” They emerge from real economic activities: trading, demand for leverage, and liquidity provision.
The Risks Beneath the Surface
Despite its potential, DeFi is far from being straightforward for fiduciaries.
Technical risk is the most apparent challenge. Smart-contract exploits, oracle manipulation, and bridge hacks have collectively caused billions in losses. The breach of the Ronin Bridge, for instance, led to one of the largest thefts in crypto history.
Regulatory complexities are also a significant concern. Many DeFi platforms operate with limited or no “know-your-customer” procedures or other anti-money laundering (AML) protections, rendering them inaccessible or unsuitable for many wealth-management clients.
Perhaps the most overlooked aspect is economic risk. Many DeFi yields are still subsidized by governance-token emissions — attractive but structurally unsustainable. The saying holds true: if you’re unsure of the yield’s origin, you may become the yield.
Considerations for Advisors
1. Demand is moving from directional exposure to income.
As the asset class matures, many clients seek participation without the risks associated with high volatility.
2. Not all yield is the same.
Returns incentivized by tokens differ fundamentally from yields driven by economic activity.
3. Operational due diligence is crucial.
While smart contracts may function autonomously, the surrounding infrastructure — including custody, valuation, compliance, and auditing — is what renders strategies investable for high-net-worth (HNW) and institutional clients.
4. Yield may ultimately serve as crypto’s bridge to mainstream portfolios.
Much like money markets underlie traditional finance, transparent and programmatic yield mechanisms could become the most enduring institutional characteristic of crypto.
If you’re interested in learning more about yield generation in DeFi, visit us for further insights.
– Gregory Mall, chief investment officer, Lionsoul Global
Ask an Expert
Q: How is Canada’s largest globally systemically important bank investing in bitcoin?
A: Royal Bank of Canada expanded its bitcoin exchange-traded product (ETP) position from 35,000 to 1.47 million shares, marking an increase of 4,104 percent, with dollar exposure rising to $102 million, a 4,363 percent increase. Furthermore, RBC augmented its Strategy (MSTR) share position by 561 percent, increasing dollar exposure to $504 million, establishing it as one of the largest Canadian bank bitcoin proxy positions.
Q: How are Canadian institutions engaging with digital assets beyond exchange-traded funds (ETFs)?
A: The Canada Pension Plan Investment Board (CPPIB) acquired 393,322 shares of Strategy (MSTR), valued at $127 million. This event signifies a pivotal moment as it is the first major Canadian pension fund to obtain exposure to bitcoin indirectly through MSTR.
Q: What are the notable developments for the third quarter of 2025?
A: Harvard University’s endowment significantly increased its iShares Bitcoin Trust position in Q3 2025, rising from 1.91 million shares to 6.81 million — a 258 percent increase, representing $443 million.
The total United Arab Emirates sovereign exposure reached $1.08 billion, making it the fourth-largest global holder following U.S. institutions. Al Warda Investment RSC Ltd. notably grew its iShares Bitcoin Trust by 230 percent to 7.96 million shares, totaling $518 million. Additionally, Mubadala Investment Corporation established a new position valued at $567 million.
Looking forward, anticipated rate cuts and the evolution of ETP infrastructure mark a clear transition of bitcoin from a speculative asset to an institutional reserve component. The combination of regulatory clarity, sovereign fund investments, and endowment participation lays a foundation for sustained institutional adoption.
Sources: SEC filings, Nasdaq, FactSet.
– Kevin Tam, digital asset research specialist
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Legal Disclaimer
The information provided is intended for educational purposes only and should not be interpreted as investment, legal, or tax advice, nor as an offer to sell or a solicitation of an offer to purchase any interests in a fund or other investment product. Access to the services and products offered by Lionsoul Global Advisors is contingent upon eligibility requirements and the definitive terms of agreements between prospective clients and Lionsoul Global Advisors, which may be updated from time to time.
