While altcoins have seen increasing inflows this month amid bitcoin’s record-breaking rally, the shadow of the 2021 crypto bubble still hangs over much of the sector.

Bitcoin reached an all-time high just shy of US$100 000 last Friday before pulling back from the milestone. The largest token by market value has surged since the US presidential election victory of Donald Trump, who touts himself as pro-crypto, and the announced resignation of US Securities and Exchange Commission chairman Gary Gensler, as the industry anticipates a more friendly regulatory environment.

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Altcoins, or alternative cryptocurrencies, have followed some of the moves of bitcoin, with many more than doubling in price from the start of the year. Still, many remain far off their all-time highs. In the past, altcoins have tended to outperform bitcoin during rallies and vice versa during bear markets because they’re usually more volatile and thinly traded.

In 2021, altcoins such as XRP soared to fresh highs during bitcoin’s earlier record run, but the tokens fell even further the following year after the collapse of crypto companies like FTX and Celsius. Since then, altcoins have been underperforming market bellwether bitcoin, but have begun to see volume and price increases in November.

Some crypto investors are hopeful altcoins could reach or surpass those 2021 prices, but James Butterfill, head of research at CoinShares, said he’s sceptical of a big rally, especially if the new Trump administration introduces a national bitcoin reserve.

Republican senator Cynthia Lummis of Wyoming has put forward a bill called the Bitcoin Act that would call on the US to sell some of the Federal Reserve’s gold to acquire a million bitcoin for a strategic stockpile.

‘Different this time’

“It will just be different this time and that’s partly because there’s still a lot more potential positive price effects on the political dividend, the election dividend particularly around the Bitcoin Act,” Butterfill said in an interview. “If that gets enabled, I think that will lead to resurgence in the bitcoin dominance.”

Solana is the only of the major altcoins that were around during the last major rally to reach a new all-time high this year.

Read: One bitcoin will now cost you R1.5-million

Nikolay Karpenko, a director at crypto trading firm B2C2, said there’s potential for this rally to be different than 2021.

“The industry really matured a lot in these three, four years, we passed through the crypto winter, a lot of the players have much more robust systems in place, risk controls,” he said. “We see more strategic investors coming in, more institutional coming in to the space, so from that perspective we have a lot of potential.”

Whether altcoins can reach 2021 highs next year remains to be seen, but Karpenko says that there’s a good chance as “there are a lot of stars aligned”.

So far this year, four of the five major altcoins have seen gains near or above 100%, with only ether lagging.

While altcoins are seeing growth in trading, more than 60% of altcoin trading volume this month has been concentrated in the five most traded altcoins compared to less than 50% earlier this year, according to Dessislava Aubert, a research analyst at data provider Kaiko.

“One of the reasons for this is that some outcomes are driven by idiosyncratic factors,” Aubert said in an interview. “Solana has been driven a lot by enthusiasm around ETF approval. Doge as well, of course it has had its own driving factors around payment features on it and Elon Musk.”

Musk will be co-leading the department of government efficiency (Doge) in Trump’s administration, with the acronym paying homage to the token.

If more altcoins receive approval for exchange-traded funds under a Trump administration, that could increase institutional interest in some of these coins. But all altcoins may not see the same growth and price potential.

Fundamentals

Butterfill expects that an increase in altcoin prices won’t happen across the board because the market is now starting to look towards fundamentals for cryptocurrency.

“There is this correlation between bitcoin and altcoins, but as the market continues to mature, I think people will start to differentiate between different assets and look at them more critically,” he said.

Read: Who was bitcoin’s Satoshi Nakamoto?

Even with these gains so far, altcoins still come at significantly lower cost than bitcoin. Ether, the next closest in value, trades at around only 4% of the price of bitcoin.