Crypto Coins
Bitcoin was the catalyst for the crypto industry, but now, several altcoins are thriving too. Traxer/Unsplash

KEY POINTS

  • Crypto ETF adoption is rising among traditional institutions, and other firms are also tapping into the stablecoin market
  • Recent interest cuts have also helped drive people to search for alternative, emerging yield opportunities
  • Proven real-world use cases of crypto and blockchain segments have significantly triggered the involvement of TradFi
  • Altcoins must 'establish their product-market fit' to see massive growth before year-end: HashKey's Jupiter Zheng

In the fast-evolving world of blockchain technology and cryptocurrencies, altcoins gained ground in the last month, driven by the positive momentum of Bitcoin during the "Uptober" season.

While an uptick in the world's largest crypto asset by market value is undeniably a driver of positive activity within the broader blockchain industry, leading crypto investment firm and platform HashKey Capital is bullish on altcoins beyond Bitcoin's impact.

In a recent report titled "Why We're Bullish on Altcoins" that it shared with International Business Times, HashKey Capital revealed three bullish signals on why it expects altcoins to possibly surge further in the coming months.

Institutional Adoption of ETFs, And Now Stablecoins

The crypto industry's colorful history has been marred by mistrust and skepticism. However, the tides have been changing, as proven by the influx of institutional firms tapping into the industry through exposure to spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs).

"ETFs will boost the price of Bitcoin and its dominance, which is crucial for an Altcoin season. Therefore, if we observe significant inflows into the ETF, we can expect an altcoin season to be on the horizon," Jupiter Zheng, Partner of Liquid Funds & Research for HashKey Capital, and an author of the report, told International Business Times.

Indeed, BTC ETFs have been on a wild roll since their approval in January. While Bitcoin ETFs took only nine months to post $20 billion in total net flows, gold ETFs had a five-year trek toward the same milestone.

Following the Bitcoin and Ethereum ETFs frenzy, institutions are beginning to explore the opportunity in the massive stablecoin segment.

HashKey Capital pointed to the Solana network's role in accelerating institutional adoption over the past year. The crypto asset manager noted how Solana's collaborations with major institutions such as Visa and PayPal helped drive interest in stablecoins among traditional and digital financial service providers.

Macro Tailwinds May Benefit Altcoins

Current macro tailwinds may also benefit altcoins, not just Bitcoin, and among such drivers is the Federal Reserve's recent interest rate cuts.

"This has resulted in ample liquidity within the system and encouraged people to seek more emerging yield opportunities, as traditional risk-free rates are very low," the report noted.

It's not just the U.S. that cut rates. China's central bank cut two key rates to help boost the economy, and the Bank of Canada also cut rates amid inflation woes.

"As U.S. monetary easing extends into next year, we believe major altcoins with relatively high staking yields, such as ETH and SOL, are likely to benefit," HashKey projected.

Spotlight on Real-World Utility May Lead to Altcoin Demand Spike

HashKey observed that the convergence of artificial intelligence, DePIN (decentralized physical infrastructure network), and real-world asset tokenization have driven demand for altcoins across diverse industries.

A key example is Farmsent, dubbed the world's first farmers blockchain. Earlier this year, Nuklai, the world's first on-chain smart data platform for AI model training and data sharing, partnered with leading layer-1 blockchain for DePIN and RWAs, peaq, to transform agriculture through data-driven applications.

Aside from DePIN convergence, RWAs have truly played a key role in driving interest around altcoins. "The involvement of traditional finance (TradFi) is driving the growth of tokenized assets," HashKey Capital noted.

Franklin Templeton, which has over $1 trillion in assets under management, has announced plans to tokenize a mutual fund on the Solana blockchain, marking a significant milestone in the tokenization segment's journey toward institutional adoption.

HashKey projects that such real-world use cases will eventually demand higher and resolve some of the altcoin supply glut.

Altcoins to the Moon Before End-2024?

An altcoin season is more likely if Bitcoin continues to climb and break through its previous all-time high. There are also lingering challenges that altcoins need to overcome the altcoin season – when other crypto assets beyond BTC surge – kicks off.

HashKey's report reiterated that investors will always prioritize profitability. "Investor preferences and the ability of these venture capital-backed altcoins to establish their product-market fit are critical challenges that must be addressed for altcoins to experience significant growth before the end of 2024," Zheng said.

Still, HashKey believes it's not impossible, especially if Bitcoin soars. "In an optimistic scenario, altcoin season is more probable when Bitcoin's price surpasses $80,000," the authors emphasized.

On which altcoins will potentially see the biggest gains before the new year, the report highlighted Solana (SOL) and Chainlink (LINK) as the possible 2024 top gainers due to their significant progress and network performance in recent months. Zheng also projected that "some lower-value, fundamentally solid DeFi tokens" can end the year on a positive note.

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