Where is institutional capital flowing? Analyzing the five major investment directions in this potential "alt season".

As Bitcoin breaks through $120,000 and Ethereum returns above $3,400, discussions about the return of the alt season are heating up. Although there are doubts about whether the alt season has truly arrived, if a new round of capital inflow cycles begins, what opportunities should investors pay attention to? This article discusses five tracks: asset reserves, ETF candidates, RWA, DeFi, and stablecoins from a subjective perspective.

How is this round of "alt season" different from previous years?

Unlike the "barbaric growth" driven by retail investors and speculative sentiment in the past, the dominant logic of the current market is changing:

1. The macro environment has changed significantly. As regulatory boundaries become clearer, the barriers for traditional financial institutions to enter are decreasing. The participation of institutional funds will change the ownership of market pricing power, as they place greater emphasis on compliance and fundamentals.

2. Institutional driving force behind Bitcoin spot ETF. According to the data, the large-scale net inflow of Bitcoin spot ETFs is basically synchronized with the three-phase structural rise of Bitcoin, and institutional funds have become an important driving force for Bitcoin's price trend.

3. The siphoning effect of listed companies hoarding coins. The acceleration of U.S. listed companies accumulating Bitcoin further amplifies the capital siphoning effect. In the past six months, the pace at which listed companies have increased their Bitcoin holdings has significantly accelerated, with a holding increase of up to 40%.

4. A new narrative of Ethereum as an asset reserve is taking shape. Several publicly listed companies have incorporated ETH into their asset reserves, and currently, the Ethereum reserves held by publicly listed companies account for 9.6% of the total ETH supply.

These trends indicate that where institutional funds are, market hotspots may also be found. If this round of "alt season" begins, it may be more driven by institutional funds rather than traditional sector rotation or speculative fervor. Tracks that can accommodate large amounts of capital or sectors that attract institutional fund overflow may be more attractive.

Asset Reserve Track: Which Coins Can Be Added to Corporate Balance Sheets?

Based on the trends of Bitcoin and Ethereum, tokens included in corporate balance sheets are more likely to become important investment directions in this round of "alt season". Currently, listed companies have incorporated some mainstream altcoins into their asset reserves, including BNB, SOL, TRX, and HYPE.

From an investment perspective, SOL has performed relatively weakly during this round of price correction, and its chip structure is also relatively loose. Therefore, as long as the fundamentals are not damaged, once market funds flow back, the price elasticity of SOL may be more pronounced. HYPE, as an emerging project, has a short lifecycle, but it may have more "growth dividends" in the new cycle.

In the long term, the tokens that can appear on corporate balance sheets will be part of the "institutional main line" of the crypto market. In the future, it is worth continuing to pay attention to more tokens that are included on corporate balance sheets.

ETF Candidate Tracks: Which altcoins can institutions invest in?

Since the United States approved spot ETFs in January 2024, the total net asset value of Bitcoin and Ethereum spot ETFs has reached a substantial scale. ETFs are becoming an important channel for institutional funds to enter the market and are also becoming an important narrative for altcoins. Potential ETF candidate coins include: SOL, XRP, LTC, DOGE, ADA, DOT, HBAR, AXL, APT.

Solana (SOL) has taken the lead in the altcoin ETF space. If a traditional spot SOL ETF is approved in the future, it could further enhance its market appeal. XRP is also facing a similar situation, with a high probability that the SEC will approve an XRP spot ETF this year. Furthermore, XRP has consistently maintained its resilience during multiple rounds of market corrections.

LTC and HBAR have a high probability of approval, and neither has been labeled as securities, with clear compliance attributes. Among them, HBAR has also shown strong resilience against declines in the market's multiple rounds of impact.

RWA Track: On-Chain Mapping of Real-World Assets

RWA (Real World Assets) unlocks the potential for asset liquidity, transparency, and global accessibility by tokenizing traditional assets. With the gradual optimization of the regulatory environment, the RWA sector receives policy support.

According to data from rwa.xyz, the largest RWA asset by market capitalization is BlackRock's BUIDL fund. This is followed by Ondo, Superstate, and Centrifuge. Chainlink's decentralized oracle is a key infrastructure for many RWA projects.

RWA naturally aligns with institutional investment preferences, serving as a "bridge track" that combines real yields with compliance expectations. Currently, the main protocols that have formed a scale and issued tokens are Ondo (ONDO) and Centrifuge (CFG). As an indispensable technological pillar of the RWA track, Chainlink (LINK) is also worth paying attention to.

DeFi Track: Real Cash Flow, Institutional Exemption Catalyst

DeFi (Decentralized Finance) is receiving support at the policy level. The U.S. SEC plans to introduce an "innovation exemption" policy to pave the way for the compliant development of DeFi projects. On-chain data for DeFi shows strong performance, especially with the quarterly trading volume of derivative DEX hitting a new all-time high.

In the DeFi space, the total value locked (TVL) in lending protocols accounts for the highest proportion, followed by liquidity staking protocols. The leading protocols are Aave and Lido. DEXs are among the most profitable types of protocols, with the leading DEXs on different public chains performing particularly well.

With the continuous heating up of the Ethereum ecosystem, DeFi projects on it are most likely to benefit from the capital overflow effect. The lending track leader AAVE and the DEX track leader UNI, with their mature ecosystem status and stable revenue models, may become the preferred choice for capital. HYPE, as an emerging potential project, shows certain investment attractiveness due to its rapid growth in the derivatives trading field.

Stablecoin Track: The Narrative Closest to Real Payment Implementation

The next wave of real adoption for cryptocurrencies may come from stablecoins and payments. With the introduction of the Genius Act, the regulatory framework for stablecoins is becoming increasingly clear. The stablecoin sector often forms synergies with the RWA and DeFi sectors.

In the stablecoin sector, centralized stablecoins like USDT and USDC dominate due to their dollar reserve peg. As investment options, one can choose governance tokens of decentralized stablecoins, such as MKR behind DAI or ENA behind USDe.

Sky (formerly known as MakerDAO) is a leader in the decentralized stablecoin sector, maintaining a healthy financial condition by investing in tokenized U.S. Treasuries and demonstrating solid fundamentals. Ethena, on the other hand, is a protocol set to launch in 2024, but its capital lock-up scale is already comparable to that of Sky, and it is collaborating with Securitize to launch a public chain, Converge, focused on RWA.

Conclusion

The real explosion of the altcoin market depends on the joint catalysis of capital structure, policy environment, and market narrative. When Bitcoin and Ethereum become the core assets held by institutions, a new "altcoin logic" quietly takes shape: only those coins with solid fundamentals, the ability to tell a clear story, and acceptance by institutions are likely to navigate through the fog of valuation reconstruction in the upcoming cycle and become the true winners.