Altcoin Season Is Never Coming Back (CoinShares Interview)

Key takeaways

• Institutional crypto allocations remain low but are rising. Butterfill said survey-based allocations were about 1.3%, compared with the commonly cited 1% level.
• His portfolio-allocation view: In an earlier article, “A Little Bit of Bitcoin Is a Lot,” he proposed a 4% Bitcoin allocation, while stressing that the appropriate amount depends on risk tolerance. He said allocations below 1% may have little effect on a portfolio, while allocations above roughly 12% can cause Sharpe ratios—and therefore risk-adjusted returns—to deteriorate quickly.
• Altcoins are attracting selective flows, not a broad “altcoin season.” Butterfill said he believes the traditional altcoin-season pattern “will never start again.” Bitcoin and Ethereum account for about 95% of ETF assets under management, while capital going to alternatives is selective and can be more meaningful relative to those assets’ smaller sizes.
• Bitcoin’s near-term outlook depends heavily on monetary policy. Absent a significant shift toward looser policy, Butterfill expected Bitcoin to trade around $75,000–$85,000/87,000 through year-end. He viewed tight policy and inflation uncertainty as headwinds.
• He considers near-term quantum risk to Bitcoin low. He estimated that breaking relevant cryptography with Shor’s algorithm would require 100,000–200,000 qubits, compared with about 100 reliable qubits currently. He said the risk is not systemic in the short term.

Portfolio construction and risk framework

Butterfill’s comments suggest the following framework:

• Set the allocation according to risk appetite and portfolio impact, considering risk-return trade-offs, volatility, and growth potential.
• Treat 4% as a reference point, not a universal target. In his original analysis, a 4% Bitcoin allocation added about 1 percentage point of portfolio volatility.
• Consider rough lower and upper bounds: below 1% may not materially affect results; above about 12%, risk-adjusted returns may fall quickly.
• A barbell approach is one possible construction: combine very low-risk assets, such as government bonds, with higher-risk assets such as Bitcoin. Butterfill gave the example of 10% Bitcoin and 90% Treasury bonds, saying the combination could make a good portfolio.

Funds, ETFs, and institutional participation

• Butterfill said it is difficult to determine how much ETF/ETP inflow represents genuinely new capital versus existing crypto holdings moving into regulated products. He pointed to 13F filings as one source of information on fund holdings.
• He cited $11.5 billion in inflows since July, following price lows and Scott Bessent’s announcement of a bond-buyback program. He also cited about $6 billion in net inflows year-to-date.
• After the Binance hack, he said crypto products saw about $1 billion in outflows over the following week. He considered the reaction excessive, noting that Binance’s SAFU fund had compensated users and that some funds had been frozen rather than lost.
• He emphasized assessing flows as a percentage of assets under management: a $100 million inflow is significant for an asset with around $500 million in AUM, but small for Bitcoin with around $100 billion in AUM.
• Bitcoin still dominated ETF inflows, but Butterfill noted periods of strong relative flows into Ethereum, Solana, and Zcash. He also cited XRP and Solana as examples of assets associated with SEC-approved ETFs, and Hyperliquid as a strong performer in relative-flow terms.

Bitcoin, macro conditions, and market scenarios

• Butterfill described Bitcoin and gold as long-term assets that tend to perform poorly when interest rates rise and more favorably when rates fall and monetary conditions loosen. He argued that Bitcoin also has a growth element that gold lacks.
• He said the outlook had worsened after the Iran conflict changed inflation expectations. In his account, markets had shifted from expecting three rate cuts to three hikes during the year.
• He saw continued tight policy and uncertainty about when inflation would ease as reasons Bitcoin could remain range-bound. A move to substantially looser monetary policy would be favorable, but he did not consider that his main scenario.
• On cycle history, he said previous Bitcoin-cycle maximum drawdowns were typically 80–85%, compared with about 50% in the current cycle. He attributed some of the smaller decline to institutional buying, which partly offset about $40 billion in outflows from large holders/players.
• He cautioned that the four-year-cycle thesis rests on a sample of only three halvings, which is not statistically significant, although it may become partly self-fulfilling. Under that pattern, large investors might not return in force until around six months before the next halving in May 2028—roughly the following year, in the interview’s framing.
• Potential market catalysts he discussed included a major change in monetary policy or an unusual fiscal event, such as pressure on the U.S. government to reduce long-term bond yields. He cited U.S. national debt at 122% of GDP, while describing a debt explosion as unlikely.

Quantum-computing risk

• Butterfill said Shor’s algorithm could threaten some older Bitcoin wallets using 256-bit ECDSA, but that a sufficiently powerful quantum computer is not currently available.
• He estimated that 6–8% of Bitcoin supply may be in older, vulnerable wallet formats, including coins associated with Satoshi Nakamoto. He said this did not constitute a systemic Bitcoin risk and opposed reallocating or confiscating Satoshi’s coins.
• He mentioned BIP 361 as a proposed Bitcoin software update and anticipated debate among core developers over the next three to four years.
• He cautioned that a quantum breakthrough could trigger a broad market panic, but argued that traditional finance would also face substantial risks.

Assets and instruments mentioned

Cryptoassets: Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, Zcash (ZEC), and Hyperliquid.

Other assets and instruments: Gold, silver, ETFs/ETPs, Treasury and government bonds, and 10-year and 30-year U.S. yields.

Sectors and themes: Digital-asset investment products and institutional crypto custody.

Disclosures and sources

No explicit “not financial advice” disclaimer appears in the interview subtitles.

Presenters/sources: Lark Davis (host/interviewer) and James Butterfill, identified as Head of Research at CoinShares.