Altcoin Rally on the Horizon in Q2 2025 as Regulations Improve, Says Sygnum Bank

Altcoins may be primed for a significant comeback in Q2 2025, driven by regulatory clarity and rising user traction, according to Swiss digital asset bank Sygnum.In its latest Q2 2025 investment outlook, Sygnum noted that while Bitcoin (BTC) continues to dominate market share—reaching a four-year high in market dominance—altcoins are poised for a breakout as improved regulations and economic incentives shift investor attention.“Drastically improved regulations have laid the groundwork for a strong alt-sector rally,” Sygnum said. “None of the positive developments have been priced in.”Improved U.S. Crypto Policy Boosts Market OutlookSygnum highlighted recent U.S. crypto policy developments, including President Donald Trump’s Digital Asset Stockpile initiative and new stablecoin regulatory frameworks, as key catalysts for altcoin adoption.The bank expects that as user traction grows, successful protocols will begin to outperform BTC and reduce its market dominance.“We expect protocols successful in gaining user traction to outperform and Bitcoin’s dominance to decline,” the report stated.High-Performance Chains and Layer-2 Networks Compete for AdoptionAs competition increases across the blockchain space, Sygnum spotlighted several high-performance protocols like Toncoin (TON), Sui, Aptos, Sonic, and Berachain as contenders in the next wave of crypto innovation.These platforms aim to address scalability and efficiency issues in existing ecosystems like Bitcoin, Ethereum, and Solana, but face the challenge of translating technology into real-world adoption and sustainable fee income.Berachain: Incentivizes validators to provide liquidity to DeFi apps.Sonic: Rewards developers based on user acquisition and retention.Toncoin: Benefits from Telegram's 1 billion user base to boost network exposure.Sygnum also praised Base, Coinbase’s Layer-2 network, for maintaining a lead in metrics like daily transactions, throughput, and total value locked (TVL)—even after the memecoin craze cooled down.Memecoins, AI Tokens Dominate Q1 Investor InterestDespite price pullbacks, memecoins remained one of the top narratives in Q1 2025, trailing only AI tokens, according to a recent CoinGecko report.AI tokens: 35.7% of global investor interestMemecoins: 27.1% of global investor interestInstitutional Interest in Bitcoin Remains StrongWhile retail investors continue speculating on memecoins, institutional players are quietly increasing exposure to Bitcoin. According to Bitwise, at least 12 publicly traded firms bought Bitcoin for the first time in Q1, raising total public firm BTC holdings to $57 billion, according to Cointelegraph.