The signal behind Grayscale's rebalancing: Why ADA remains the third-largest smart contract asset in institutional eyes

Grayscale recently announced its quarterly rebalancing results, showing that Cardano (ADA) increased its weight in the smart contract fund to 18.55%, becoming the third-largest holding in the fund. Although this adjustment may seem routine, it reflects ongoing institutional recognition of ADA’s long-term value and hints that market expectations for the Cardano ecosystem are gradually being realized.

The Power Hierarchy of Institutional Allocation

According to the latest weight distribution disclosed by Grayscale, the institutional allocation landscape in the smart contract sector is as follows:

The logic behind this list is quite clear: Solana and Ethereum lead due to their mature ecosystems and trading volume, which is not surprising. However, ADA maintaining a 18.55% weight in third place, surpassing other competitors by over 10 percentage points, indicates that Grayscale’s evaluation of Cardano remains positive.

The True Meaning of the Weight Change

It’s important to note that ADA’s weight in Grayscale’s smart contract fund has decreased from 24.63% in March 2022 to the current 18.55%. While this decline might raise concerns, in the broader context, it reflects routine adjustments in fund strategy rather than a loss of confidence in ADA.

Grayscale’s rebalancing follows the rules of the CoinDesk Smart Contract Platform Select Cap Index, which is standard for passive index funds. The reduction in weight could be due to better performance of other projects or natural adjustments related to fund size and market conditions. The key point is that ADA’s position in the top tier has never been shaken.

Market Response to This Signal

From related news, it’s evident that the futures market reacted quite enthusiastically to this rebalancing news. In the past 24 hours, ADA futures trading volume on BitMEX surged by 25,084%, reaching $162 million. Meanwhile, the total open interest in ADA futures across the network increased by 1.29% within 24 hours, totaling 1.99 billion ADA, worth approximately $816.97 million.

The driving force behind this trading frenzy is not only Grayscale’s rebalancing but also market anticipation of multiple catalysts:

• Grayscale Spot ETF Application: Under review by the SEC, decision expected early 2026
• Ouroboros Leios Upgrade: 67% of technical progress completed, with potential to boost network throughput to 200-1000 TPS
• Midnight Sidechain Launch: Emphasizing privacy features, with over 20,700 holders already onboard

Ecosystem Differences Compared to Competitors

Although ADA’s weight lags behind Solana and Ethereum, each has its own technical strengths. Ethereum boasts the most mature ecosystem, Solana attracts high transaction volume due to its high throughput, and Cardano is known for its academic-driven approach, emphasizing security and scalability.

This differentiated positioning is valuable for institutional investors. Grayscale has allocated ADA across multiple products, including the Digital Large Cap ETF (GDLC), indicating that it views Cardano as an essential component in the smart contract sector rather than an optional one.

Founders’ Confidence

Cardano founder Charles Hoskinson recently stated that 2026 could be a pivotal year for Cardano. Despite ADA experiencing over 60% retracement in 2025, he remains optimistic about the project’s long-term fundamentals, especially the opportunities brought by Midnight and network upgrades. This attitude aligns with Grayscale’s continued allocation.

Key Future Watchpoints

The upcoming key events to monitor include:

• SEC’s decision on approving Grayscale’s spot ADA ETF
• Specific timeline for the launch of Ouroboros Leios mainnet
• Practical application effects of the Midnight sidechain
• Market’s pricing response to these upgrades

Based on current futures activity, the market has already begun pricing in these potential positives. If these catalysts are successfully realized, ADA’s weight in institutional holdings may be reassessed.

Summary

Grayscale’s rebalancing confirms ADA’s position in the top tier of the smart contract sector. Although its 18.55% weight is lower than two years ago, this is mainly a natural adjustment due to fund size and market environment rather than a loss of confidence. More importantly, this rebalancing, combined with market expectations for multiple technological upgrades and policy support, sends a relatively positive signal.

For investors focused on Cardano, the current priority should be to observe the progress of these catalysts rather than be distracted by short-term price fluctuations. The continued institutional recognition indicates that market consensus on ADA’s long-term value remains intact, with the key question being whether these expectations can translate into increased ecosystem activity.