The altcoin market has been on a tear, surging more than 50% since early July and fueling speculation that a full-blown altcoin season could be just around the corner.
Signs of a Shift Away from Bitcoin
According to Coinbase’s latest monthly market report, published August 14, the rally combined with a decline in Bitcoin dominance could be the first signal of a broader rotation into altcoins as September approaches.
Bitcoin’s share of the total crypto market has fallen from 65% in May to around 59% in August. While CoinMarketCap’s Altcoin Season Index still sits in the low 40s well below the 75 mark typically used to confirm alt season Coinbase sees macroeconomic and liquidity conditions lining up in altcoins’ favor.
Institutional Demand Driving ETH and Related Tokens
Much of the recent strength has been tied to growing institutional demand for Ethereum (ETH). Digital asset treasuries now hold nearly 3 million ETH just over 2% of total supply.
A big part of that demand comes from Bitmine Immersion Technologies, which has purchased 1.15 million ETH this year following a massive $20 billion fundraising round.
This institutional push has also boosted tokens closely correlated with ETH’s daily returns, including Arbitrum (ARB), Ethena (ENA), Lido DAO (LDO), and Optimism (OP). Of these, Lido has been the standout performer, climbing 58% month-to-date.
Coinbase points out that LDO has historically been a go-to option for gaining ETH exposure through liquid staking. The recent rally may have been helped by SEC guidance suggesting that certain liquid staking services may not qualify as securities under current interpretations.
Liquidity Recovery and Retail Potential
Coinbase also highlights over $7.2 trillion currently sitting in U.S. money market funds an all-time high as a potential source of fresh capital. With the Federal Reserve expected to cut interest rates in September and October, the yield advantage of money market funds could diminish, freeing up more retail cash for crypto and other risk assets.
On the liquidity side, Coinbase’s internal index which measures stablecoin issuance, trading volumes, and order book depth has started to rebound after six months of declines. The firm expects this recovery to continue, aided by clearer regulations around stablecoins and other digital assets.
Outlook for Q3 2025
While Coinbase stops short of officially declaring altcoin season, it’s clear they’re optimistic. With Bitcoin dominance dropping, institutional interest in ETH rising, and liquidity trends turning positive, the stage may be set for a more defined altcoin rally in the coming months.
