State of the altcoin market: should we expect an "altcoin season" in 2025?

The onset of the "altcoin season" — a period when altcoins show significant growth and often outperform bitcoin — remains a hot topic for crypto investors. The year 2024 has seen significant changes in the cryptocurrency industry, including the launch of spot bitcoin-ETFs, increased regulation in several countries, and the introduction of new technology solutions.

According to CoinGecko, in January 2025, bitcoin's share of the total cryptocurrency market capitalization was 52.7%, above the average for the past three years. In 2025, market attention again focuses on a possible "altcoin season."

Current situation in the altcoin market

Altcoins are facing mixed dynamics in 2024. Some of the key highlights include the following:

Ethereum (ETH) growth following network upgrades to improve scalability and reduce fees. In 2024, Ethereum introduced the "Dencun" update, which reduced the cost of transactions on Layer 2 networks by 70%. The average commission on the Ethereum network in December 2024 was $1.3 compared to $5.6 in December 2023.
The popularity of memcoins such as DOGE, SHIB, and recently TRUMP and MELANIA has shown phenomenal growth. For example, the price of TRUMP rose 450% in three weeks in early 2025.
Increased interest in DeFi and L2 solutions, particularly in projects based on ZK-Rollups and OP-Stack. Zero-Knowledge Rollups is a technology for aggregating multiple transactions into a single packet sent to the Ethereum core network. Zero-knowledge proofs allow all transactions to be verified as correct without revealing their details, making the network more efficient and private. Optimistic Rollups Stack is a technology that utilizes the Optimistic Rollups mechanism, aggregating transactions and sending them to the Ethereum core network with minimal verification. Unlike ZK-Rollups, it uses the principle of trust: transactions are considered correct until proven otherwise. One of the leaders in the sector of L2 solutions is Arbitrum, a platform that uses Optimistic Rollups technology to scale Ethereum. In January 2024, the Total Value Locked (TVL) in Arbitrum's network was $1.9 billion; by January 2025, it had grown to $3.4 billion.
The fall of several altcoins failed to offer investors innovative solutions. For instance, Fantom (FTM) lost 37% of its value in the last quarter of 2024 due to decreasing activity in the ecosystem.

Factors affecting the altcoin market in 2025

Factors contributing to the growth of altcoins

Bitcoin dominance and spot ETFs. Despite BTC's dominance, investors are starting to pay attention to promising altcoins. For example, after $15 billion flowed into bitcoin spot ETFs in the first quarter of 2024, some capital moved into Ethereum and Solana.

Spot bitcoin ETFs have attracted institutional investment, some of which may move into altcoins. According to a Grayscale report, 35% of institutional investors are considering investing in altcoins in 2025.

Layer 2 development and scalability. Ethereum is actively developing Layer 2 (L2) solutions, which reduce fees and increase network capacity. For example, the daily number of transactions in Optimism's L2 network has grown from 180k in early 2024 to 320k in early 2025.

New trends in DeFi and GameFi. The return of interest in decentralized finance (DeFi) and blockchain gaming drives demand for the respective tokens. For example, TVL in DeFi projects has grown from $45 billion in December 2023 to $63 billion in January 2025.

Lower inflation in major economies. Improving macroeconomic conditions may stimulate increased interest in risk assets, including altcoins. In 2024, inflation in the U.S. fell to 2.9%, which helped boost investment in cryptoassets.

Factors hindering the growth of altcoins

Bitcoin is highly dominant. BTC's market share remains high (over 50%), which reduces the liquidity of altcoins. For example, in January 2025, the bitcoin dominance index reached 54%, the highest value since 2021. Institutional investors favor Bitcoin for now. According to a Bloomberg report, 78% of new crypto funds in 2024 are focused on BTC and ETH.

Cryptocurrency regulation. Authorities in the U.S., EU, and China continue to tighten regulations, which could negatively impact the growth of altcoins. In 2024, the SEC refused to register 11 new tokens on centralized exchanges. New bans and restrictions on using anonymous tokens (Monero, Zcash) are possible. Thus, in 2024, South Korea banned the listing of anonymous cryptocurrencies.

Experts about the "altcoin season" in 2025

Optimists believe that altcoins will grow after Bitcoin's dominant phase ends. According to Michael van de Poppe, a well-known trader and cryptocurrency analyst, "the altcoin season will begin in the second quarter of 2025."

Skeptics point to the need for increased regulation and possible economic risks. For example, analysts at JPMorgan believe that "altcoins could face additional pressure due to increased transparency requirements."

Neutral experts say that growth is possible, but it will be selective. Ark Invest states, "Market leaders will retain their positions, while weak projects will fade into oblivion."

Thus, investors should monitor altcoin fundamentals and analyze the market. Individual altcoin growth is possible in 2025, but the classic "altcoin season" remains in doubt.