Crypto VCs Say Fed Policy Holds the Key to the Next Altcoin Boom

While Bitcoin has surged to new highs, many investors are now turning their attention to altcoins—cryptocurrencies other than Bitcoin—with hopes of the next big rally. However, top venture capitalists in the crypto space say the real catalyst lies beyond the charts: it’s all about the Federal Reserve.

Executives at Arrington Capital, a major player in the blockchain investment scene, believe two major factors will determine whether altcoins see significant gains in the near future. For now, they’re not planning to exit any positions.

Patience Before Profits

“It’s still the early stages outside of Bitcoin,” said Ravi Kaza, the newly appointed Chief Investment Officer at Arrington Capital, speaking to DL News. According to him, the altcoin cycle has so far been relatively weak and underwhelming.

Even with Bitcoin hitting record levels, major altcoins like Ethereum and Solana are still well below their peak values. As per CoinGecko data, Ethereum remains 45% under its all-time high of $4,878, while Solana trails 36% behind its January peak.

Arrington Capital, which holds stakes in more than 100 blockchain projects, is staying the course. Colton Conley, a recently added partner at the firm, remarked, “There’s still room to run. We’re waiting for a significant altcoin breakout before thinking of reducing exposure.”

The Fed’s Role in a Crypto Surge

Kaza points to two scenarios that could ignite the next wave in altcoins. First, the Federal Reserve must begin lowering interest rates. If rate cuts are not in the cards, then the alternative would be the Fed injecting liquidity into the market through quantitative easing—buying government bonds to increase cash flow.

“When the Fed isn’t easing, it’s difficult for altcoins to outperform Bitcoin,” said Kaza, who previously held a senior role at Duquesne Capital Management under billionaire Stanley Druckenmiller. He recalled how past interest rate cuts sparked rallies across the broader crypto market, not just in Bitcoin.

Regulatory Changes on the Horizon

Another factor VCs are watching closely is the evolving regulatory environment in the United States. Lawmakers have recently advanced stablecoin legislation, which would set clear guidelines for dollar-backed cryptocurrencies. The bill is now headed for a final vote, and if it passes, it could open the floodgates for broader adoption.

Some in the crypto industry believe this could lead to a tenfold growth in the stablecoin sector.

At the same time, many investment firms and fund managers have submitted applications for spot altcoin exchange-traded funds (ETFs), hoping to capitalize on what appears to be a more accommodating Securities and Exchange Commission under the current leadership.

“Regulatory clarity matters more for altcoins than for Bitcoin,” Kaza added. “Bitcoin already had a relatively settled status going into the elections, but the rest of the crypto market didn’t have that luxury.”