Optimism is at its highest in the cryptocurrency market, with investors seeing tailwinds ahead in the broader space beyond Bitcoin.
However, while some have called for 2025 to be the year of the altcoin, JPMorgan believes bitcoin will be the main attraction, and that the top token is poised to continue its surge after a 120% rally last year. last year.
Market professionals pointed to cyclical trends that could breathe life into altcoins like Solana or XRP, either of which rallied strongly after Donald Trump’s election victory on the prospect of a rally from the new administration.
However, JPMorgan gave 4 reasons why investors necessarily turn to altcoins.
First, long-term policy remains speculative, and the timing and effects of the new regulations are still uncertain.
While looser regulatory oversight should boost sentiment across the industry, there’s no guarantee that the appeal of decentralized finance is about to rise.
“It remains unclear the extent to which these new regulations would allow the crypto ecosystem to encroach into the traditional financial system and whether public blockchains such as the ethereum blockchain and others would play a more significant role going forward,” JPMorgan said.
Meanwhile, ambitious plans for the development of crypto reserves both in the US and beyond are likely to focus entirely on bitcoin, JPMorgan said. Some US states are already pushing bills to start stockpiling the token as an inflation hedge, an idea Washington could embrace in Trump’s second term.
Second, bitcoin has demonstrated dominance in the crypto fund space.
JPMorgan expects retail and institutional investors to invest their flows into spot Bitcoin ETFs, helped by the token’s characterization as virtual gold. In December, Bernstein predicted that Bitcoin would upgrade gold as the primary price store for the global economy over the next decade.
According to JPMorgan, Bitcoin accounted for 35% of the total $78 billion inflows into the crypto market in 2024.
This compares to subdued flows into Ethereum spot ETFs, which amassed about $2. 4 billion after their launch in July, JPMorgan said. The bank warned that long-term ETFs for altcoins like Solana would likely attract limited inflows as well.
Third, the Bitcoin network becomes a competitor to tokens with more use cases, such as Ethereum.
For most of its existence, Bitcoin was seen only as a buy-and-hold asset, providing little utility. But programmers have worked to expand its functionality, and new smart contract features will help it catch up with its competitors.
At the same time, giant companies may move away from public blockchains (like Ethereum) in favor of personal blockchains, which have developed customizable responses for institutional investors, JPMorgan said.
Fourth, new altcoin projects will need time to evolve.
New decentralized initiatives typically experience early success amid fresh hype, before user activity fades away — eroding a token’s value. To achieve longevity, projects need to prove long-term application benefits, the bank said.
Given this, investors do not expect a repeat of the cryptocurrency bull market of 2021. That year, projects were a success through token distribution, but the industry is now focusing more on developing blockchain capabilities.
“In this model, profits from successful projects often benefit private corporations, diverting value from crypto tokens,” JPMorgan outlined.
JPMorgan also notes that MicroStrategy is only halfway through its plan to invest $42 billion in bitcoin. The software company made its decision by amassing a trove of bitcoins through equity and loan financing. Its large purchases have a tailwind for the token, as the company is responsible for 28% of cryptocurrency inflows last year.