Altcoin breakout coming? Kraken’s chief economist says investors are still waiting for a catalyst
Bitcoin is, at least historically, a cyclical asset.
These cycles revolve around the ‘halving,’ where rewards for mining Bitcoin are cut in half, decreasing the supply of new Bitcoin available to investors.
A huge aspect of previous cycles has been the rotation of capital from Bitcoin to altcoins. In the most recent cycle, decentralized finance (DeFi) experienced a massive boom, called DeFi summer. NFTs also became incredibly popular, with thousands being minted each day on a variety of platforms.
The last halving was in April of 2024, and Bitcoin has since risen over 70%. Altcoins have significantly underperformed during this time; Ethereum is down over 30%, Solana has only increased by 25%, and Dogecoin has risen by about 30%, according to Kraken’s price feed.
Thomas Perfumo, Chief Economist at Kraken, spoke with TheStreet Roundtable’s Scott Melker about the altcoin market’s outlook in 2025. He believes that the catalyst for the altcoin market has still not happened, and remains optimistic.
This Bitcoin cycle is unique in a lot of ways.
The biggest reason for that is the government’s attitude towards digital assets has changed drastically under President Trump. He paused investigations, launched his own crypto projects, and directed his administration to craft clear and unburdensome regulations for the industry.
Simultaneously, he has created uncertainty in the markets with his tariff policies, which seem to change daily. As Perfumo points out, this discourages investments in high-risk assets.
“I think (Bitcoin dominance) is more of a reaction to the short-term environment. (In the current macroeconomic environment) risk on is just not the thing to do. And so people are hunkering down back into Bitcoin.”
Bitcoin has multiple advantages to altcoins in this respect. One is that Bitcoin has “been viewed as a commodity for quite a while. There wasn’t really ever the threat that it might be viewed as a security.”
Another factor is the institutional involvement now present in the Bitcoin network. “Bitcoin has an additional advantage, which is that it has the tie to the traditional capital markets in the form of vehicles like the Bitcoin ETFs and also large demand purchasers like MicroStrategy that has bought,” Perfumo explained.
“I believe it’s over $8 billion worth of spot Bitcoin year-to-date loan. And so that to me is more of an indication or a reason why you’re seeing Bitcoin outperform so much compared to the altcoins,” he added.
While altcoins have yet to run this cycle due to various market conditions, there is still so much potential and exciting projects being built. Eventually, those who want to take on more risk will turn their eyes back to digital assets outside of Bitcoin.
