Altcoins on the Brink of a Major Breakout? | by Cryptoverse | Apr, 2025
PT. 3: FACTORS INFLUENCING CAPITAL ALLOCATION
Regulation is emerging as a key factor in determining where capital is allocated in crypto markets. The U.S. elections have fueled optimism, with the SEC dropping lawsuits and repealing restrictive rules (SAB 121). U.S. -based projects, tracked by Kaiko’s EAGLE Index (EGLX), have outperformed Bitcoin post-election, reflecting investor confidence.
Rising interest rates have also fundamentally altered capital allocation, setting the 2024 rally apart from the liquidity-driven 2021/2022 bull run.
Instead of a broad rally, the altcoin rally seems to be concentrated in only a few assets, particularly when it comes to institutional demand.
- Selective winners: Only a handful of assets may see significant upside, rather than a widespread altcoin boom.
- • A shift to revenue-generating protocols: The influence of institutional investors in altcoin selection is likely to shift priority to utility-driven and revenue-generating protocols, excluding memecoins.
- • Liquidity first: Capital rotation may be more measured, favoring assets with deep liquidity and real-world use cases
The past two years have challenged the traditional altseason playbook. Liquidity is increasingly concentrated in Bitcoin and a select few altcoins, regulations are evolving, and Bitcoin’s growing adoption as a treasury asset further complicates the landscape.
Looking ahead, altseasons may become a thing of the past, necessitating a more nuanced categorization beyond just ‘altcoins,’ as correlations in returns, growth factors, and liquidity among crypto assets are diverging significantly over time.
While opportunities in altcoins remain, their growth and long-term viability will likely depend on strong liquidity, real-world adoption, and institutional support.
Could 2025 be the year of strategic altcoin-picking rather than a full-fledged altseason? The data suggests this might indeed be the case.