DeFi, Layer-2 Tokens Outshine Legacy Coins as Bitcoin Hits Record Highs
Bitcoin’s surge to new all-time highs on Thursday has spotlighted a shifting crypto market where certain altcoins are pulling ahead while others lag behind. The divergence has increasingly fallen along sector lines, with decentralized finance (DeFi) tokens and layer-2 networks racing ahead as older coins tread water.
Tokens tied to DeFi and layer-2 ecosystems are enjoying strong gains as traders adopt a risk-on stance. Meanwhile, coins like Tron (TRX, $0.3007), Bitcoin Cash (BCH, $509.78), Litecoin (LTC, $92.74), and Monero (XMR, $329.03) have seen little movement in comparison.
Even Solana (SOL), previously a darling during crypto’s last explosive rally, has posted only modest gains of 3.9%. In contrast, tokens such as Sei (SEI, $0.3280), Ethena (ENA, $0.3252), and Optimism (OP, $0.6470) have surged as much as 28%.
“Altcoins are leading the pack in this latest rally,” noted Thomas Perfumo, Kraken’s global economist, in an email. He pointed out that Bitcoin dominance — which measures BTC’s share of the total crypto market — has slipped from 64% to 63.5%, signaling that traders are shifting capital into altcoins.
Unlike prior bull runs in 2017 and 2021 — when Bitcoin’s dominance typically rose alongside its price — this cycle is showing a different pattern. Institutional involvement appears to be reshaping how money flows through the crypto ecosystem.
Institutions Drive New Market Dynamics
Crypto markets are famous for round-the-clock trading and volatile price swings. Historically, altcoins tended to move together, rising during Bitcoin’s consolidation periods and falling sharply during its rallies or crashes.
This time, the rally appears more fragmented, partly due to rising institutional interest in Ethereum (ETH) and the search for yield opportunities in DeFi.
Institutions looking for ways to earn returns are exploring DeFi protocols, fueling demand for tokens in that sector.
Layer-2 networks are also benefitting as solutions to Ethereum’s scalability challenges become more vital. Arbitrum, for example, facilitates faster transactions and efficient liquidity flows between decentralized applications and staking protocols. Its ARB token has climbed 15% in the past 24 hours.
Divergent Views on Altcoin Sustainability
Despite the excitement, not everyone believes the altcoin rally will endure. Petr Kozyakov, CEO of payments firm Mercuryo, said Bitcoin’s long-term appeal as a store of value remains powerful.
“While altcoins are also in the green with Ethereum spiking past the $3,000 mark, the underlying ‘orange pill’ narrative remains steadfastly in place,” Kozyakov said. “Bitcoin’s growing status as a store of value is one that more and more big players and institutions are simply unable to ignore.”
Arthur Hayes, the former BitMEX CEO and now a fund manager, has a different view.
“Get ready for a monster alt season,” Hayes posted on X, predicting that ETH could reach $10,000 during this market cycle.
If Hayes proves right, Bitcoin might temporarily lose momentum as traders chase profits in the altcoin sector. Such a shift could further sideline older coins like LTC, BCH, and XMR, which lack significant new catalysts to spark renewed interest.
