Macro update

Last week opened with idiosyncratic headlines and strong crypto gains, but momentum has shifted as markets brace for this week’s FOMC decision, with futures pricing roughly a 95% chance of a 25 bp cut. Softer U.S. labour data, a 900k job revision, weaker payroll prints, and August CPI at 2.9% have reinforced expectations of looser policy. The dollar index has eased to 97.6, gold remains firm at $3,642, and 10-year yields hover near 4.06%. In this macro backdrop, Bitcoin is up 3.8%, Ethereum 7.1%, and altcoins 10.5%, signalling risk appetite returning as liquidity expectations improve.

Solana surged 19.6%, driven by strong DAT buying, especially during the second-half of the week as well as a change in narrative from ETH to SOL. DEX volumes climbed 29% to $31.5 B, TVL rose 14% to $13.1 B, and bridge flows rotated from ETH/Base into Solana and Arbitrum. Momentum is amplified by the Digital Asset Treasury (DAT) trend, with corporates like Upexi and DeFi Development Corp adding SOL to treasuries, and reports of a $1 B Galaxy–Jump–Multicoin consortium signaling institutional adoption that increasingly places Solana alongside BTC and ETH as a strategic balance-sheet asset.

On an index performance basis, very major GMCI category ended the week higher except Utilities & Tooling (-0.05%), which was essentially flat. The GMCI-30 (+3.55%) gained strongly, with large caps leading broadly. Mid caps (+0.66%) and small caps (+1.46%) advanced more modestly. Layer 2s (+6.49%) were the clear outperformers, followed by Layer 1s (+5.06%) and USA Select (+4.37%). Meme (+3.52%), AI (+2.44%), and Gaming (+2.32%) also posted solid gains, while DeFi (+1.98%) and DePIN (+1.03%) lagged the broader rally.

Altcoin open interest briefly surpassed BTC and ETH combined last week, reflecting aggressive positioning outside the majors. Basis rates surged, with ETH’s basis climbing from 5.7% to over 9.0%, a setup similar to what we saw at the start of August on ETH, when that pattern propelled a rally from the low $3,000s close to all-time highs before rejection. While the post-CPI/PPI backdrop is constructive, this time feels different as the majors consolidate and attention shifts toward SOL. Starting Sunday morning, futures exposure started easing and the basis pulled, as traders take a more cautious stance ahead of the FOMC meeting.

Our take:

“Last week, market was heavily driven by DATs and headlines however focus is now shifting onto Wednesday’s FOMC”

After two weeks driven by DAT headlines, buybacks, and tech upgrades, attention has shifted squarely to the FOMC meeting. With uncertainty over how much of a rate cut is already priced in, risk appetite is fading as traders reduce exposure. Volatility is likely into Wednesday as markets digest the Fed’s decision, projections, and Powell’s tone. Until then, macro dynamics will dominate sentiment, with majors consolidating and alt rotations pausing while participants wait for clarity on the broader market direction.

Notable headlines

• PumpFun is gaining traction as a streaming platform with lower fees, instant creator payouts, and strong cash reserves for growth, making it increasingly attractive to streamers seeking better monetization.
• Native Markets secured the USDH ticker on Hyperliquid, underscoring its growing influence in decentralized finance and ongoing recognition within the crypto ecosystem.
• Tether is launching a new US-based stablecoin (USA₮) and has appointed Bo Hines as CEO, aiming to expand its dominance and strengthen its presence in the stablecoin market.
• Polymarket partnered with Chainlink to launch 15-minute crypto price markets, offering faster settlement and enhanced security. Meanwhile, Kalshi captured 80% of $270M daily prediction market volume, overtaking Polymarket weekly thanks to strategic partnerships and the sports season.
• PayPal is leveraging its 400M+ PayPal and Venmo accounts to expand the Hyperliquid community, signaling deeper mainstream engagement with decentralized trading platforms.
• BlackRock plans to tokenize funds holding real-world assets and stocks on blockchain, marking a significant step toward integrating traditional finance with decentralized networks.
• South Korea will recognize Bitcoin and crypto firms as venture companies, granting tax breaks and signaling a supportive regulatory environment for digital assets.
• Kiln Finance is exiting all ETH validators due to security concerns, triggering a spike in the validator exit queue and raising questions about staking infrastructure resilience.
• A large-scale supply chain attack compromised a reputable NPM account, affecting packages downloaded over 1B times. The malicious payload swaps crypto addresses to steal funds, highlighting ongoing software supply chain vulnerabilities.

The altcoin season setup

As of last weekend, the total altcoin market cap finally surpassed its November 2021 peak. Are we back? The altcoin index is flashing altseason, with large caps rallying +10% last week, adding about $200 B in notional value, almost entirely in altcoins, to total digital asset market cap.

But headline breakouts can mask important shifts. Understanding the macro backdrop and industry-specific drivers that fuel altcoin rallies is key. Remember, Bitcoin and Ethereum alone have added nearly $1T to total market cap since the last time in 2021 when we had these altcoin levels, so assessing altcoins’ share relative to majors provides critical context.

Our take:

“Altcoins marketcap reached 2021 again, and while the macro backdrop is very different, the industry is finally seeing institutional adoption. How these forces balance will determine the outcome of the potential altseason”

A like-for-like comparison between the 2021 cycle is difficult. A few structural shifts make this potential last season unlike previous cycles. Together, these factors set a very different backdrop for altcoins.

In short:

(–) Higher rates and lingering inflation enforce more disciplined capital deployment.

(–) Covid-era M2 surge won’t repeat, so gains will hinge on real adoption and allocation.

(–) A market ~10× larger brings deeper liquidity and institutional legitimacy.

(+) Flows into smaller alts will be slower and selective, reducing broad melt-up potential.

Let’s take a closer look.

Risk-free rate: from zero to restrictive

In 2021, the Fed funds rate sat at 0–0.25%, creating near-zero borrowing costs that encouraged leverage and speculation. Today, rates are 4.50–4.75%, and while futures imply 3–4 cuts (~75–100 bps) over the next year, even post-cuts the cost of capital remains far above 2021 levels. This shift from ultra-accommodative to restrictive policy means risk assets, altcoins included, face a far higher hurdle for attracting capital.

M2 liquidity: from surge to stagnation

During 2020, M2 money supply growth topped 20% YoY, as historic monetary and fiscal stimulus flooded the system. That surge didn’t trigger altseason immediately, it trickled through the economy over months, boosting retail disposable income and ultimately fueling the 2021 altcoin rally. In contrast, today’s M2 growth is only slightly positive, making a repeat of that liquidity-driven exuberance far less likely. Without a similar tailwind, larger absolute inflows will be needed to move prices meaningfully in today’s much bigger, more mature market.

Market size

The scale of the crypto market today is vastly larger than in 2020. Back then, total market cap was $350–400b, with altcoins ex-BTC/ETH around $100b . By 2025, those figures have grown to $2.3–2.5T and $800–850b , respectively, a six-fold increase. With this bigger base, even sizable inflows move the needle less: a $10b  inflow that once drove a 10% surge now equates to <1.3% of the altcoin market. Altcoin rallies are therefore likely to be less explosive, demanding sustained, substantial capital to produce meaningful gains.

Retail vs. institutional flow dynamics

In 2020, crypto’s institutional rails were barely in place: no spot ETFs, fragmented custody, and regulatory ambiguity kept most large allocators sidelined. Altcoin rallies were instead retail-led, fueled by stimulus checks and UHNW cash without mandates. That flexibility allowed capital to cascade rapidly, from majors to blue chips, then to altcoins, memecoins, and NFTs, so even small flows caused outsized surges.

Today, the landscape is transformed. The EU’s MiCA regulation (Dec 2024) offers a robust framework, while U.S. and European spot Bitcoin and Ethereum ETFs trade daily, holding roughly $153b and $16b AUM, respectively. Institutions like Fidelity, Coinbase, and BNY Mellon now provide regulated custody and execution, the likes are Blackrock are looking to tokenize funds on Ethereum and Digital Asset Treasuries (DATs) collectively control >$100b in majors. 

Together, ETFs and corporations own 8–10% of BTC supply, and institutions now drive 60–70% of new capital (vs. ~80–90% retail in 2020–21). These compliance-bound players prioritize BTC, ETH, and SOL, deploy them in staking or DeFi strategies, and rotate far more selectively into smaller alts, making a broad, indiscriminate altcoin melt-up far less likely this cycle.

Conclusion

While the macro backdrop is less forgiving and the market far more mature than in 2020–21, institutional and mainstream adoption is finally unfolding. Spot ETFs, robust custody solutions, and regulatory clarity are drawing stable capital, yet higher rates and a vastly larger market cap make indiscriminate altcoin rallies far less likely. How these forces balance is hard to predict, but what’s clear is that any coming altseason will be more selective and disciplined, driven by genuine utility rather than speculative hype. For investors, rigorous analysis is essential to separate technologies with real-world traction from mere vaporware.