Inside the 2025 altcoin divergence: Could 2026 be an ‘L1 season’?

2026 has started with renewed momentum in the altcoin market.

The Altcoin Season Index is ticking higher, signaling a rotation back into alts. That said, when looking back at the 2025 cycle, a clear divergence stood out, with investors deviating from the usual rotation playbook.

Historically, altcoins tended to outperform during periods of Bitcoin [BTC] consolidation. This cycle, that rotation never fully played out.

The ETH/BTC ratio stayed range-bound, capping Ethereum’s [ETH] speculative upside. 

Notably, that dynamic showed up clearly in 2025 returns. 

From a technical lens, ETH closed the year down 10.97%, entering the new year below the $3k level. Bitcoin, by contrast, held up better, finishing 2025 down 6.24%, suggesting capital largely stayed parked in BTC.

Still, despite the weakness, Ethereum continued to post strength across key on-chain metrics.

In fact, this wasn’t isolated to Ethereum. Similar upticks were seen across other L1s, highlighting a clear divergence this cycle.

Naturally, the disconnect between price action and fundamentals is drawing attention. With the “speculative” narrative for altcoins under scrutiny, all eyes are now on L1s. Is 2026 shaping up to be their season?

2026 altcoin divergence: Speculation vs. utility

As the new year kicks off, predictions are heating up. 

Notably, one theme stands out: Layer 1 utility. From the RWA market and stablecoins to chain-specific upgrades, 2026 is starting to show a clear focus on real network activity rather than just speculative “hype.”

The key part? On-chain numbers back this up.

As the chart below highlights, Ethereum recently processed a record 2.23 million transactions, the largest in its 10-year history, while keeping fees under $0.01 and finality stable, showing no network congestion.

What’s more, other Layer 1s are showing the same trend.

In this context, AMBCrypto’s thesis starts to gain weight. While 2025 didn’t deliver an “altcoin season,” the market still saw a clear shift, with growing ETF flows toward these altcoins showing the trend is more than a one-off.

Now, as the market heads into 2026, the foundation stands strong.

High-cap altcoins are showing solid on-chain usage, while speculative activity is beginning to fade, creating a divergence that could spark a full-blown “L1 season,” with Layer 1 networks finally taking the spotlight.

Final Thoughts

• Despite altcoins underperforming Bitcoin in 2025, on-chain activity shows strong fundamentals, signaling a divergence between speculation and usage.
• With high-cap altcoins showing solid network activity, 2026 could be defined by a full-blown Layer 1 season.