Smart contracts and stablecoin policy drove altcoin strength as BTC underperformed
Bitcoin may have underperformed in the third quarter of 2025, but altcoins benefited from shifting U.S. policy and stronger exchange activity, according to a new report from asset manager Grayscale. The firm suggested that Q3 could mark a “distinct” altcoin season compared with prior cycles.
Bitcoin vs. altcoins in Q3 2025
Grayscale noted that while returns across crypto markets were positive — including Bitcoin (BTC), Ether (ETH), AI tokens, and smart contract platforms — Bitcoin lagged behind other categories.
“Bitcoin underperformed other market segments, and the pattern of returns could be considered a crypto ‘alt season’ — although distinct from other periods of falling Bitcoin dominance in the past,” the report said.
The smart contracts sector saw particular gains, boosted by the GENIUS Act, U.S. legislation signed in July that provided legal clarity for stablecoins. Meanwhile, AI tokens and currencies also trailed behind ETH and other altcoins.
Policy and exchange growth fueling altcoin momentum
Beyond legislation, Grayscale highlighted a surge in centralized exchange volumes and the growing number of crypto treasuries holding diversified tokens as key trends driving momentum.
The firm added that pending U.S. regulatory moves, including a digital asset market structure bill, could provide another boost in Q4.
Bitcoin hits new highs but still trails peers
Bitcoin reached an all-time high above $120,000 in August, yet still lagged altcoins and even traditional assets. Research cited by Grayscale found that both BTC and altcoins underperformed gold and equities in setting new highs, partly due to stablecoin outflows from exchanges.
ETFs could drive Q4 upside
As one of the largest crypto ETF providers, Grayscale also pointed to regulatory progress. The SEC’s approval of new listing standards for crypto ETFs and a green light for Grayscale’s multi-asset product including BTC, ETH, XRP, SOL and ADA could spark further market adoption.
With Bitcoin under pressure and altcoins showing relative strength, analysts suggest that 2025’s third quarter may mark a turning point in market dynamics. If U.S. policy momentum continues into Q4, altcoins could remain the standout performers while Bitcoin consolidates its gains.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.