Key Takeaways

The Altcoin Season Index indicates a shift back towards altcoins as 2026 begins.
Despite Ethereum's decline in 2025, it demonstrated strong on-chain metrics, reflecting solid network usage.
Other Layer 1 networks are showing similar positive trends, prompting speculation about a potential “L1 season” in 2026.
The focus is shifting from speculative gains to genuine utility and network activity, signifying a possible change in market dynamics.

Exploring the 2025 Altcoin Divergence: Is 2026 the Year of Layer 1s?

The Altcoin Season Index is on the rise, indicating a shift back towards altcoins. However, a significant divergence has become apparent when reviewing the trends from 2025. Investors have deviated from the typical rotation strategy witnessed in previous cycles.

Historically, altcoins usually perform better during Bitcoin's [BTC] consolidation phases, but this cycle has not followed that pattern. The ETH/BTC ratio has remained quite stable, limiting the speculative potential of Ethereum [ETH].

ETH
Source: TradingView (ETH/BTC)

This divergence was particularly evident in last year's returns. On a technical level, ETH saw a decline of 10.97% by the end of the year, starting 2026 below the $3,000 threshold. In contrast, Bitcoin fared better, finishing down only 6.24%, suggesting that many investors preferred to keep their assets in BTC.

Despite these declines, Ethereum demonstrated resilience with strong performance in key on-chain metrics. This strength wasn't limited to Ethereum; other Layer 1 (L1) networks also showed similar positive trends, prompting questions about the disconnect between market performance and the underlying fundamentals. With the speculative narrative around altcoins being re-evaluated, attention is shifting towards Layer 1 networks. Is 2026 shaping up to be their season?

2026 Altcoin Divergence: Speculation vs. Utility

As the new year unfolds, predictions are becoming more fervent.

One prominent takeaway is the increased focus on Layer 1 utility. From Real World Assets (RWA) markets and stablecoins to specific chain improvements, 2026 is starting to prioritize genuine network activity over mere speculative hype.

What supports this assertion?

As illustrated in the chart below, Ethereum reached a remarkable feat of processing 2.23 million transactions recently—the highest in its decade-long history—while maintaining fees under $0.01 and ensuring stable finality with no network congestion.

Ethereum
Source: EtherScan

Additionally, other Layer 1s are exhibiting similar patterns.

In this context, AMBCrypto's analysis gains relevance. While 2025 did not present a conventional “altcoin season,” a distinct trend emerged with increasing flows into altcoins, indicating that this shift might not be a fleeting occurrence.

As we transition into 2026, the market’s foundation appears to be solidifying. Major altcoins are demonstrating robust on-chain engagement, while speculative interest is beginning to decline. This divergence could potentially pave the way for a comprehensive “L1 season,” bringing Layer 1 networks into the limelight at last.