A fresh wave of optimism is sweeping through the crypto markets, with signs pointing to the arrival of the long-anticipated “altseason.” According to Sygnum Bank’s Q3 2025 Investment Outlook, improved regulatory clarity, increased liquidity, and a drop in Bitcoin dominance are paving the way for capital rotation into altcoins. This shift marks a significant moment for the digital asset space, especially after a turbulent first half of the year.

Regulatory Clarity Boosts Investor Confidence

One of the key drivers of this emerging trend is regulatory clarity, particularly in the United States. The report highlights how previous uncertainty around altcoin classification had caused investor hesitation, especially amid broader geopolitical and fiscal instability. However, as regulators now extend clearer guidelines around altcoins and staking practices, the outlook has changed.

The U.S. Securities and Exchange Commission (SEC) recently confirmed that protocol staking does not fall under securities laws, offering much-needed clarity to Ethereum investors and developers. This decision has not only boosted confidence in Ether but also signalled broader regulatory support for legitimate, utility-driven crypto projects.

Sygnum notes that this environment could accelerate the flow of capital into projects with strong economic fundamentals and sustainable token models, marking a shift away from purely speculative assets.

Bitcoin Hits New Highs, but Dominance Declines

Despite the positive altcoin momentum, Bitcoin remains strong. The flagship cryptocurrency reached an all-time high above $123,000 on July 14, driven by what Sygnum describes as a persistent supply-demand imbalance. Spot Bitcoin ETFs continue to be a major factor, with over $160 billion in assets under management and more than 110,000 BTC added in the last quarter alone.

However, Bitcoin’s dominance has started to fall down more than 6% after reaching its highest level since 2021. This drop signals a return of investor interest in altcoins, especially as opportunities in Bitcoin become more saturated. This trend often marks the beginning of an altseason, where capital rotates from Bitcoin into alternative digital assets.

Ethereum Surges on Institutional Interest and Staking Boom

Ethereum is at the forefront of the altcoin revival. The network has seen a clear shift in sentiment following the successful Pectra upgrade, which introduced several protocol improvements and increased the staking cap. With nearly 30% of Ethereum’s liquid supply now staked, investor confidence appears to be growing.

Sygnum notes a “conclusive break” from Ethereum’s long-term downtrend, supported by rising institutional interest. Major financial players including Sharplink, which is planning a $1 billion ETH allocation are backing the network. In addition, new tokenization and stablecoin initiatives from global banks such as BNY Mellon and Société Générale are being built on Ethereum. Even a Trump-endorsed stablecoin, USD1, is set to launch on the Ethereum blockchain.

Exchange balances of ETH are also dropping, indicating fewer investors are looking to sell in the short term, a trend commonly associated with long-term holding and increased confidence.

DeFi and DEX Markets Reach New Heights

Another standout feature of the report is the performance of the decentralized finance (DeFi) sector. Decentralized exchanges (DEXs) captured 30% of all crypto spot trading last quarter, reaching a record $530 billion in volume. Platforms like PancakeSwap and PumpSwap have led the charge, with the latter overtaking Raydium on the Solana network.

Meanwhile, DeFi lending protocols are experiencing renewed growth. Active loans on Ethereum have reached all-time highs, driven by investor appetite for leveraged exposure during bullish periods. Liquid staking has also crossed 30% of all ETH supply, showcasing a deeper integration of staking services in the broader DeFi ecosystem.

Sygnum does caution, however, that this surge in altcoin activity may lead to another memecoin bubble. Historically, such periods have ended with sharp corrections, especially when speculative hype outweighs real-world utility.

Altseason on the Horizon, but Risks Remain

While current trends suggest that altseason may finally be here, Sygnum warns that the road ahead is not without risks. If unchecked, the current momentum in speculative tokens could spark excessive valuations and another boom-bust cycle, similar to those seen in previous crypto rallies.

Still, the report remains largely optimistic. With clearer regulations, stronger institutional backing, and robust infrastructure improvements across blockchain ecosystems, the conditions are aligning for a more sustainable altcoin market, one driven by use cases rather than memes.