Altcoins could rebound in Q2 2025 thanks to improved regulation

Swiss bank Sygnum says altcoins could recover in the second quarter of 2025 as digital asset regulation continues to improve.

In its Q2 2025 investment outlook, Sygnum said regulation of cryptocurrency use cases in the space has “improved substantially,” setting the stage for a strong rebound in the altcoin sector in the second quarter. However, the firm added that “all positive developments have yet to be reflected in share prices.”

In April, Bitcoin’s dominance reached a four-year high, suggesting that cryptocurrency investors are shifting funds toward assets that are considered relatively safe.

However, Sygnum said regulatory developments in the U.S., such as President Donald Trump’s creation of a digital asset reserve and advancement of stablecoin regulation, could drive wider cryptocurrency adoption.

“We expect protocols that successfully gain user favor to outperform, while Bitcoin’s dominance to decline,” Sygnum wrote. Greater focus on economic value sparks competition.Sygnum also said that competition will intensify as the market places greater emphasis on economic value. Increased market competition often leads to better products, which ultimately benefits consumers: “The market’s growing focus on economic value has led to more intense competition for user growth and revenue, with emerging protocols such as Toncoin, Sui, Aptos, Sonic, or Berachain taking different approaches.”

Sygnum added that while high-performance blockchains address the limitations of the Bitcoin, Ethereum, and Solana blockchains, they have found it challenging to achieve meaningful adoption and fee revenue.

The report highlights that some approaches are more sustainable. For example, Berachain’s approach of incentivizing validators to provide liquidity for decentralized finance (DeFi) applications, Sonic’s approach of rewarding developers who attract and retain users, and Toncoin’s partnership with Telegram to reach 1 billion users.

In addition to first-layer chains, Sygnum also highlights that second-layer networks like Base also have potential. The report notes that while the memecoin craze on the blockchain pushed its users and revenue to new heights, its revenue also fell sharply after memecoin began to lose momentum.

Despite this, Sygnum noted that Base remains the second-tier leader in metrics such as daily transactions, throughput, and total value locked.

Memecoins Still the Leaders in Q1 Crypto

Despite the recent price drop, memecoins remain the dominant players in the cryptocurrency space in Q1 2025. A report from CoinGecko recently highlighted that memecoins remain the dominant players in the cryptocurrency space in Q1 2025. The cryptocurrency data company said that memecoins account for 27.1% of global investors, second only to AI tokens (35.7%).

While retail investors are still busy with memecoins, institutional investors are taking a different approach. Asset management firm Bitwise reported on April 14 that public companies are buying Bitcoin in large quantities. At least 12 public companies bought Bitcoin for the first time in Q1 2025, bringing the total holdings of public companies to $57 billion.