Only 10% of crypto earns yield now — why most investors are sitting on dead money

Crypto has spent years building yield infrastructure through mechanisms such as staking on Ethereum and Solana, yield-bearing stablecoins, DeFi lending protocols, and tokenized Treasuries. Despite this constructed infrastructure, only 8% to 11% of the total crypto market generates yield today, compared to 55% to 65% for traditional financial (TradFi) assets, according to RedStone’s analysis. The issue is not the absence of products, but a lack of disclosure and comparability that impedes institutional adoption.

RedStone estimates $300 billion to $400 billion in yield-bearing crypto assets against a $3.55 trillion total market cap, noting that this 8% to 11% yield penetration rate might be overstated because of instances where staked assets are also used in DeFi protocols. Comparatively, TradFi's extensive penetration is credited to its century-long use of standardized metrics, such as risk ratings, mandatory disclosures, and stress-testing frameworks. These tools enable comparability, fostering trust among institutions, a factor currently missing in crypto markets.

The GENIUS Act introduced a federal framework for payment stablecoins, mandating full reserve backing and compliance under the Bank Secrecy Act. This regulatory clarity drove a 300% year-over-year growth in yield-bearing stablecoins, after a long period of stagnation due to regulatory ambiguity. While regulation reduced some uncertainties, it didn’t address risk transparency, leaving significant gaps for institutions who expect robust risk metrics to compare yield opportunities effectively.

RedStone’s central finding emphasizes that the barrier to institutional adoption is a transparency deficit in risk measurement. Important obstacles include:

• Lack of comparable risk scoring: A 5% yield on staked ETH has inherently different risks (e.g., liquidity or smart contract risks) than a 5% yield on stablecoins backed by Treasuries.
• Inconsistent asset quality breakdowns: While DeFi discloses certain metrics like collateral ratios, tracking rehypothecation requires a mix of on-chain forensics and off-chain custodian data.
• Oracle and validator dependencies: Many platforms fail to rigorously disclose reliance on single price feeds or small validator sets, increasing concentration risks.

Crypto’s double-counting issue further complicates clarity. For example, staked ETH that is wrapped, deposited into a lending protocol, and reused as collateral inflates TVL (Total Value Locked) metrics, leading to overstated yield-bearing percentages. Traditional finance avoids this by strictly separating principal from derivative exposures, whereas crypto’s transparency paradox—everything is visible but lacks aggregation into meaningful risk metrics—creates confusion for institutions.

The next step for crypto isn't creating new yield products; the existing ones—staked assets, yield-bearing stablecoins, and tokenized Treasuries—already span the risk spectrum. What’s lacking is the measurement layer, which requires:

1. Standardized risk disclosures
2. Audits of collateral and counterparty exposure
3. Accurate treatment of rehypothecation and double-counting

This isn’t a technical issue; on-chain data is inherently auditable. However, coordination is needed between issuers, platforms, and auditors to establish frameworks seen as credible by institutions.

Although crypto’s yield infrastructure is strong, the 8%-11% penetration rate signals that risks associated with these opportunities are incomprehensible to institutional allocators. TradFi’s success lies not in its inherently safer assets but in the transparency and comparability of its risk metrics. Until crypto adopts these same principles of standardized measurement and disclosure, its adoption will remain constrained—not by the lack of yield products or regulatory hurdles, but by opaque risk profiles.