A long-anticipated rotation into altcoins may be underway amid improved regulatory clarity, growing liquidity and a surge in onchain activity, according to Sygnum’s Q3 2025 Investment Outlook.
Geopolitical tensions and US fiscal uncertainty earlier this year led to a sell-off across the altcoin sector. However, changing market dynamics “may ignite the long-awaited altseason,” the digital bank said in the report shared with Cointelegraph.
“As regulatory clarity extends to altcoins, capital could rotate toward projects with real economic use cases and sustainable token models, and perhaps this shift is already underway as some sectors currently show,” Sygnum wrote.
The report also noted a decline in Bitcoin dominance, which hit its highest level since 2021 amid geopolitical and trade-related macro pressures, but recently dropped over 6% amid capital return to altcoins.
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Bitcoin hits new highs on supply squeeze
The report said that liquidity trends for Bitcoin (BTC) remain “extremely bullish,” as a persistent supply and demand imbalance has driven the largest cryptocurrency by market value to new all-time highs. BTC hit an ATH above $123,000 on July 14.
“Bitcoin Spot ETFs have now exceeded USD 160 billion in assets under management, accumulating more than 110k BTC last quarter alone,” Sygnum wrote. Ether (ETH) followed with falling exchange balances, ETF inflows and nearly 30% of its liquid supply staked.
The Ethereum narrative shifted after a successful Pectra upgrade, which “raised the staking cap and introduced several protocol improvements.” Regulatory clarity has reinforced this trend, as the US Securities and Exchange Commission clarified that protocol staking “does not fall under securities law.”
Sygnum said Ether has “conclusively broken its long-term downtrend,” citing a surge in institutional demand. Sharplink is planning a $1 billion ETH allocation, and a fresh wave of tokenization and stablecoin initiatives from Wall Street giants, including BNY Mellon, Société Générale and a Trump-backed USD1 stablecoin, are launching on Ethereum.
Related: BitMine’s $1B repurchase plan favors shares over more ETH — for now
DEX market share hits 30%
Decentralized exchanges hit a record high last quarter, capturing 30% of all crypto spot trading after memecoin launches pushed DEX volumes to $530 billion. The surge was led by PancakeSwap on BNB Chain, while Solana’s PumpSwap quickly overtook Raydium, the report noted.
DeFi lending also hit an all-time high of $70 billion locked, and liquid staking surpassed 30% of Ether’s supply. “The DeFi lending sector is one of the strongest beneficiaries of market rallies, with active loans on Ethereum surging to new all-time highs as investors take on greater risk and leveraged exposure,” Sygnum wrote.
However, the bank warned that the current momentum in altcoins could spark another memecoin bubble, which history suggests may end in a sharp correction if it continues unchecked.
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