The DeFi sector is booming, leaving traditional coins like LTC, BCH, and XMR in the dust.

DeFi and Layer-2 Tokens Steal the Spotlight as Bitcoin Hits Record High

Bitcoin’s explosive rally to fresh all-time highs on Thursday is shining a light on an evolving crypto market where certain altcoins are leaving the rest behind. The winners and laggards are increasingly split along sector lines.

Tokens linked to decentralized finance (DeFi) and layer-2 scaling solutions are sprinting ahead as traders embrace riskier bets. In contrast, older tokens like Tron (TRX, $0.3007), Bitcoin Cash (BCH, $509.78), Litecoin (LTC, $92.74), and Monero (XMR, $329.03) are barely budging.

Even Solana (SOL), a star of past crypto rallies, is taking a breather, up just 3.9%. Meanwhile, lesser-known names such as Sei (SEI, $0.3280), Ethena (ENA, $0.3252), and Optimism (OP, $0.6470) have surged as much as 28%.

“Altcoins are leading the pack in this latest rally,” said Thomas Perfumo, Kraken’s global economist, in a note. He highlighted the dip in Bitcoin’s dominance—from 64% to 63.5%—as evidence that traders are rotating into altcoins.

This behavior differs from previous bull runs, like those in 2017 and 2021, when Bitcoin’s dominance typically climbed alongside its price. This time, institutional investors appear to be playing a bigger role in reshaping the market dynamic.

Institutional Shifts Fueling Growth

Crypto markets are notoriously volatile and run 24/7, creating unique trading cycles. In past rallies, altcoins often rose together during Bitcoin consolidation and tumbled collectively during sharp Bitcoin moves. Now, the patterns are more fragmented, influenced by institutional interest in Ethereum and yield strategies.

DeFi tokens have been buoyed by institutional enthusiasm for Ethereum (ETH), potentially driving capital into yield-focused DeFi protocols.

Layer-2 networks are also thriving as solutions to Ethereum’s scalability bottlenecks. For instance, Arbitrum allows faster transactions and liquidity movement between decentralized applications and staking platforms. Its ARB token is up 15% over the past day.

Not Everyone Is Convinced

Still, some industry voices remain skeptical about the staying power of the altcoin rally. Petr Kozyakov, CEO of payments firm Mercuryo, believes Bitcoin will ultimately maintain its dominance.

“While altcoins are also in the green with Ethereum spiking past the $3,000 mark, the underlying ‘orange pill’ narrative remains steadfastly in place,” Kozyakov said. “Bitcoin’s growing status as a store of value is one that more and more big players and institutions are simply unable to ignore.”

Meanwhile, Arthur Hayes, the former BitMEX CEO turned crypto fund manager, has a far more bullish outlook on altcoins.

“Get ready for a monster alt season,” Hayes declared on X, predicting ETH could soar to $10,000 during this market cycle.

If Hayes’ forecast comes true, Bitcoin might experience short-term headwinds as liquidity flows into the altcoin market. Such a shift could leave older “OG” coins like LTC, BCH, and XMR struggling even further, lacking fresh catalysts to spark investor excitement.