There’s no denying that this crypto market cycle was led by Bitcoin. Since the beginning of 2023, the global crypto market cap has grown by 167%, while Bitcoin's market cap has surged by an impressive 276%, with a pure price increase of 258%. This has propelled Bitcoin’s dominance from 38% to 54% (data: Coingecko), capturing the public’s attention and overshadowing other cryptocurrencies.

Indeed, those other cryptos, also called altcoins, were mostly dragged along by Bitcoin. Their market cap has grown only 112% since January 2023, excluding stablecoins whose supply grew by 52%, while prices (obviously) remained stable.

However, it might be too early to dismiss the altcoins. While Bitcoin has been enjoying growing institutional and political attention, the teams behind many other cryptoassets have been hard at work, developing their products and services to offer real value beyond the hype of the previous bull run.

The larger crypto space is evolving, drawing in users and VC money. Here are the main trends to consider when trying to understand if and when the altcoin season will come.

Web3 activity

Most altcoins represent the business side of the crypto industry, leaving the “money” function to the undisputed champion that is Bitcoin. Native cryptocurrencies, such as ETH or SOL, reflect the blockchains’ development. Tokens, such as UNI or USDT, represent decentralized applications (DApps) built on blockchains, as well as stablecoins/collectibles/memecoins issued on them. The success of these DApps and tokens drives demand for their respective blockchains' native currencies, used to pay transaction fees.

That’s why monitoring web3 trends is a worthwhile task. As shown by the recent data from DappRadar, DApps activity has seen an impressive rise since 2023, with the number of unique active wallets (UAW) on the top 12 blockchains increasing 15-fold.

Currently, the most popular DApps are built on opBNB (layer-2 on BNB chain), NEAR, and Ronin, which register 30 million, 19 million, and 12 million daily UAW, respectively.

The most popular web3 sectors include crypto gaming, led by gaming studio Boomland with 2.4 million monthly UAW, and social platforms, like decentralized content distribution platform Revox, with almost 10 million monthly UAW.

In comparison, DeFi is struggling to attract more users. However, according to DeFiLlama, the current total value locked (TVL) of $146 billion is 2.5 times the amount in January 2023. Ethereum remains the leading blockchain by TVL, with $100 billion, of which $27 billion is locked in Lido, a liquid staking protocol.

VC investment

Another way to gauge the future of web3 is to examine VC activity. Venture capital still plays a vital role in creating and developing crypto projects. Recent reports by Pitchbook and Galaxy Digital shed light on this year’s VC deals.

According to Galaxy, the amount of capital invested by the VC is slightly on the rise this year, with $5.7 billion invested since January. However, the numbers are still much lower than at the peak of the Web3 hype in 2022.

There is also a qualitative shift in VC funding. Pitchbook’s senior analyst Robert Le notes, “investors are concentrating capital into a smaller range of opportunities. There’s a flight to quality. A few years ago, their investments were more spread out across the space.” Currently, the most popular narratives among venture capitalists include the DApps industry (crypto gaming, social, and decentralized physical infrastructure, or DePIN) and blockchain networks.

It is rather surprising that new blockchains still attract significant interest. According to Le, there are over 150 layer 1 and layer 2 blockchains operating, and not all are likely to be viable long-term. He predicts that  “Solana, Bitcoin, Optimism, Arbitrum, and Base are the winners”.

The web3 sector, including DApps and the blockchains they are built on, along with their respective cryptoassets, still needs to prove itself and its value to the users to regain investor interest. Judging by the increasing user activity, this process may already be underway, potentially leading to a new hype cycle soon. Furthermore, historically, any prolonged BTC price rises have eventually triggered altcoin hype, and we might be approaching this moment. Bitcoin billionaire Arthur Hayes recently stated that if Bitcoin and Ether decisively break through $70,000 and $4,000, respectively, it could “create a strong foundation for the return of a sexy shitcoin soiree” by the end of the year. We'll soon find out if this forecast comes to pass.