Altcoins may see a resurgence in the second quarter of 2025 as regulations for digital assets continue to improve, according to Swiss bank Sygnum.
In its Q2 2025 investment outlook, Sygnum said the space has seen “drastically improved” regulations for crypto use cases, creating the foundations for a strong alt-sector rally for the second quarter. However, it added that “none of the positive developments have been priced in.”
In April, Bitcoin dominance reached a four-year high, signaling that crypto investors are rotating their funds into an asset perceived to be relatively safer. Still, Sygnum said regulatory developments in the US, such as President Donald Trump’s establishment of a Digital Asset Stockpile and advancing stablecoin regulations, may propel broader crypto adoption. “We expect protocols successful in gaining user traction to outperform and Bitcoin’s dominance to decline,” Sygnum wrote.
Increased focus on economic value ignites competition
Sygnum also said that competition would increase as the market focuses on economic value. Increased competition in a market often results in better products, ultimately benefiting consumers: “The market’s increased focus on economic value compels greater competition for user growth and revenues, with rising protocols such as Toncoin, Sui, Aptos, Sonic, or Berachain taking different approaches.” Sygnum added that while high-performance blockchains address limitations of the Bitcoin, Ethereum and Solana blockchains, they find it challenging to achieve meaningful adoption and fee income.
The report highlighted that some approaches have been more sustainable. These include Berachain’s approach of incentivizing validators to provide liquidity to decentralized finance (DeFi) applications, Sonic’s rewarding developers that attract and retain users, and Toncoin’s Telegram affiliation to access 1 billion users. Aside from layer-1 chains, Sygnum highlighted that layer-2 networks like Base also have potential. The report pointed out that while the memecoin frenzy on the blockchain pushed its users and revenue to new highs, it made an equally sharp decline after memecoins started losing steam. Despite this, Sygnum noted that Base remains the layer-2 leader in metrics like daily transactions, throughput and total value locked.
Memecoins still a leading crypto narrative in Q1
Despite recent price declines, memecoins remained a dominant crypto narrative in Q1 2025. A CoinGecko report recently highlighted that memecoins remained dominant as a crypto narrative in the first quarter of 2025. The crypto data company said memecoins had 27.1% of global investor interest, second only to artificial intelligence tokens, which had 35.7%. While retail investors are still busy with memecoins, institutions have a different approach. Asset manager Bitwise reported on April 14 that publicly traded firms are stacking Bitcoin. At least 12 public companies purchased Bitcoin for the first time in Q1 2025, pushing public firm holdings to $57 billion.