Ethereum leads the rise strongly, Bitcoin's dominance declines, are alts really coming into season? | In-depth analysis of market rotation signals

Question

Recently, the pattern of the Crypto Assets market has changed: Ethereum's price has soared nearly 30%, the inflow of Ethereum Spot ETF funds far exceeds that of Bitcoin, Bitcoin's dominant position has fallen below the critical psychological threshold of 60%, and the total market capitalization of altcoins is approaching historical highs. Do these signs indicate that the alt season, which has been dormant for more than two years, is about to return? This article will analyze current market rotation signals in depth, revealing the key conditions confirming the arrival of the alt season, based on on-chain data, fund flows, market dominance indicators, and the alt season index.

Ethereum's Strong Rise: A Potential Catalyst for Alt Season?

In the past week, Ethereum (ETH) has performed exceptionally well, with its price soaring nearly 30%, far exceeding Bitcoin's (BTC) 5% increase. ETH's intraday high reached $4715, just a step away from its historical high set in 2021. More notably, this rise in Ethereum may play a more significant role as a potential trigger for the alt season.

The long-dormant alt season (referring to the period when non-Bitcoin crypto assets start to outperform Bitcoin) seems to be showing signs of revival. On-chain analytics firm Glassnode points out that Ethereum's recent performance has once again become a barometer for the market, with its movements not only being independent but also likely setting the tone for the rhythm of the entire market.

Capital flow reveals a shift in market preference

Strong capital inflows support Ethereum's leading position:

Ethereum Spot ETF Attracts Strong Capital Inflow: Over the past six days, the net inflow into the Ethereum Spot ETF reached as much as $2.3 billion, with a single-day inflow hitting a record $1 billion.
ETH ETF Surpasses BTC ETF: Since the beginning of July, the inflow of funds into Ethereum ETF has exceeded that of Bitcoin ETF by $1.5 billion, reversing the previous trend.
Institutions continue to accumulate ETH: The total value of Ethereum held by institutional treasuries has surpassed $16.5 billion, with BitMine, SharpLink, Ether Machine, and other institutions being the main accumulators.

On-chain fundamentals remain solid

The underlying network health of Ethereum remains strong:

DeFi TVL Dominates the Market: The total value locked (TVL) in decentralized finance (DeFi) is close to $96 billion, accounting for more than 60% of the entire DeFi market, continuously proving Ethereum's core position as the fundamental layer for practical applications.

Overall, Ethereum's strong performance, massive capital inflows, and solid fundamentals have collectively sparked market expectations for broader rotation—can Ethereum once again herald the collective recovery of alts?

Bitcoin's Dominance Declines: A Key Signal of Market Rotation

The "Bitcoin Dominance" indicator, which measures the proportion of Bitcoin's market capitalization to the total market capitalization of the entire Crypto Assets market, has recently fallen significantly:

Fall through a key psychological level: Bitcoin's dominance has fallen by more than 7 percentage points since reaching a peak of nearly 66% in June during this cycle, currently hovering around 58.4%. This is the first time in six months that it has fallen below the 60% mark.
End of Historic Uptrend: This decline marks the end of the longest uptrend in Bitcoin's dominance in history, lasting more than 1020 days.
Technical Pattern Indicates Shift: Analysts have observed that this decline is accompanied by the completion of a long-term five-wave structural pattern, which is often seen as a signal for a change in the market's leading cycle.

The decline of Bitcoin's dominance means that altcoins are capturing greater investor attention and capital share. This change coincides with the total market capitalization of altcoins approaching an all-time high, reinforcing the view that market focus is rotating from Bitcoin to a broader range of Crypto Assets (alts).

Alt Season Index: Currently in a Neutral Zone

However, the "Altcoin Season Index," which measures the overall momentum of alts, adds a touch of caution to market expectations:

Index is Neutral: The current value of the index is 51, which is in the "neutral" zone, neither a clear Bitcoin season nor an altcoin season.
Long Waiting Period: Historically, a typical alt season lasts about 18 days on average, with the longest record being 117 days. Currently, the market has not experienced an alt season for over 240 days, indicating a long-term Bitcoin-centric market.

Nevertheless, multiple indicators show that the underlying structure of the market is changing, revealing early signs of rotation. The decline in Bitcoin's dominance, the increase in alts' market share, and the long wait for the end of the alt season all point to a potential market turning point.

How to confirm that the alt season has truly arrived?

How to determine if the alt season has truly started during a market transition period? Although the term is often used generically, the market has established some reliable benchmarks to more accurately identify these periods:

Alt Season Index Threshold: The core quantitative indicator is the altcoin season index. The methodology typically holds that when at least 75% of the top 50 alts have outperformed Bitcoin over the past 90 days, the altcoin season is confirmed. Currently, this index is only at 51, far below the 75% threshold. Historical data shows that the number of times this index has clearly entered the alt season zone (404 times) is much fewer than during Bitcoin dominance periods (953 times). The current duration without an alt season (240+ days) far exceeds the average interval (66 days), and the market is in an abnormally long neutral period.
Growth of alts relative to BTC's market capitalization: It is necessary to observe the market capitalization growth of Layer 1 and Layer 2 tokens relative to Bitcoin. For example, during the last major alt season at the beginning of 2021, assets like Solana (SOL), Cardano (ADA), and Avalanche (AVAX) achieved triple-digit percentage increases within 60 days, while Bitcoin remained flat during the same period. In this market cycle, few altcoins, apart from Ethereum, have been able to consistently outperform Bitcoin.
Trading Volume Rotation Signal: During altcoin season, the trading volume of alts on centralized and decentralized exchanges typically sees a significant increase. For example, in the 2021 cycle, the top ten trading pairs by volume on mainstream exchanges expanded from BTC and ETH to include meme coins, game tokens, and mid-cap Layer 1 tokens. Currently, trading volume remains highly concentrated on trading pairs of Bitcoin and Ethereum, with limited spillover effects to small-cap alts.
ETF Fund Flows: The inflow of funds into Ethereum Spot ETFs continues to surpass that of Bitcoin ETFs, which is a new observation point recently, indicating early signs of interest in alts (at least large-cap alts). However, there is currently no ETF focused on a broader range of alts that serves as the main driver of overall fund flows.

Conclusion: Dawn is breaking, but key conditions have not yet been fully met

In summary, there have indeed been several positive signals in the market recently: Ethereum's strong lead, a massive influx of capital (especially through ETFs) into Ethereum, a significant decline in Bitcoin's dominance, the total market capitalization of alts nearing new highs, and a long wait for a non-altcoin season, all strongly suggest that market rotation may be brewing, with Ethereum's performance potentially acting as a catalyst for the upcoming alt season.

However, a confirmed alt season requires a broader and more sustained collective performance of alts outperforming Bitcoin, which necessitates meeting the alt season index threshold, significant relative market capitalization growth of alts, and a rotation of trading volume into the altcoin sector, among other core conditions. Currently, these key confirmation signals have not yet fully manifested, and the market remains in a critical observation period or early rotation stage.

The cryptocurrency market is full of uncertainty, and the current positive signs bring hope to altcoin enthusiasts, but investors still need to remain rational, closely monitor the emergence of the aforementioned confirmation signals, and always keep in mind the principle of risk control: trade cautiously and do not invest funds beyond their capacity.

Conclusion: The explosive market movement of Ethereum and the loosening dominance of Bitcoin have undoubtedly ignited hopes for the long-awaited alt season. Massive funds are flowing into ETH through ETF channels, institutions are continuously increasing their holdings, and the stability of on-chain fundamentals together construct the underlying logic of market rotation. However, the official start of the altcoin season still requires confirmation of key signals, such as a broader range of alts consistently outperforming BTC and effective trading volume rotation. The market is at a delicate turning point, and investors must remain vigilant while capturing potential alt season opportunities, making rational decisions based on data indicators, and managing risks effectively. The true altcoin frenzy may already be on its way, but confirming its arrival still requires patience and insight.