DeFi assets are on a tear, outpacing older cryptocurrencies such as Litecoin, Bitcoin Cash, and Monero.

DeFi and Layer-2 Tokens Shine as Bitcoin Hits Record High, Leaving Older Coins Behind

Bitcoin’s historic surge past previous records on Thursday set off a split in the crypto market, with some altcoins leaping ahead while others struggled to keep pace. The dividing line appears to fall along sector boundaries, highlighting shifting investor sentiment.

Tokens linked to decentralized finance (DeFi) and layer-2 blockchains are leading the way, as traders embrace higher-risk assets amid renewed enthusiasm. In contrast, coins such as Tron (TRX, $0.3007), Bitcoin Cash (BCH, $509.78), Litecoin (LTC, $92.74), and Monero (XMR, $329.03) have shown only modest moves in recent days.

Even Solana (SOL), a star of previous market booms, has lagged somewhat, climbing just 3.9%. Meanwhile, tokens like Sei (SEI, $0.3280), Ethena (ENA, $0.3252), and Optimism (OP, $0.6470) have soared as much as 28%.

“Altcoins are leading the pack in this latest rally,” said Thomas Perfumo, global economist at Kraken, in an email. He pointed to a dip in Bitcoin’s market dominance—from 64% to 63.5%—as a sign that funds are shifting into alternative tokens.

In earlier bull runs in 2017 and 2021, Bitcoin dominance typically climbed as prices rose, but this time, the dynamic is shifting, thanks in part to institutional involvement.

Institutions Fuel New Trends

Crypto markets are notorious for high volatility and round-the-clock trading, and historically, altcoins tended to move as a single block, either rising while Bitcoin paused or dropping sharply during Bitcoin’s big swings. But this cycle seems different, with institutions increasingly active in the space.

DeFi tokens are benefitting from greater institutional focus on Ethereum (ETH), which could drive further interest in yield opportunities as firms seek higher returns.

Layer-2 networks are also gaining traction as solutions to Ethereum’s congestion and speed issues. Networks like Arbitrum help move liquidity rapidly between decentralized exchanges and staking protocols. Arbitrum’s ARB token has gained 15% in the past 24 hours.

Not Everyone is Convinced

Still, some voices urge caution. Petr Kozyakov, CEO of payments company Mercuryo, believes the altcoin rally might be short-lived.

“While altcoins are also in the green with Ethereum spiking past the $3,000 mark, the underlying ‘orange pill’ narrative remains steadfastly in place,” he 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.”

Not all share that caution. Arthur Hayes, the BitMEX founder turned crypto fund manager, has a far more optimistic view.

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

If Hayes’ outlook proves correct, Bitcoin might face short-term challenges as traders chase potential profits in the altcoin market. That could leave older “OG” coins like LTC, BCH, and XMR even further behind, lacking major catalysts to reignite interest.