Institutional Demand for Ethereum May Ignite Altcoin Season

Current market conditions suggest the imminent onset of a full-scale altcoin season. According to a forecast by Coinbase Institutional, this could commence in September.

Capital Rotation and Market Signals

The dominance index of Bitcoin in the market has decreased from 65% in May to 59% by August. Experts view this as an early indication of capital flowing into altcoins.

Analysts noted a divergence in metrics. The CoinMarketCap altcoin season index remains around 40 points, with a threshold value of 75. However, the total market capitalization of coins has increased by 50% since early July, reaching $1.4 trillion on August 12.

This discrepancy is attributed to high demand for Ethereum from major players.

Role of the Federal Reserve and Retail Investors

Experts disagree that the anticipated rate cuts by the Fed in September will mark a local peak for the crypto market. They believe that easing policies could instead attract retail investors.

U.S. money market fund accounts hold a record amount—over $7 trillion. The expected Fed rate cuts will reduce their appeal, potentially leading to a shift of some capital into riskier assets, including digital ones.

Analysts added that cryptocurrency liquidity has begun to recover after a six-month decline. This is aided by the growth in stablecoin issuance amid improved regulatory clarity.

The Ethereum Factor and High-Beta Tokens

Growing interest in the second-largest cryptocurrency by market capitalization from institutional investors has become a key market driver. Demand is supported by corporate treasuries (DATs) and narratives around stablecoins and RWA.

For instance, Bitmine Immersion Technologies acquired 1.15 million ETH. Currently, the largest corporate holders control about 2.95 million ETH, accounting for over 2% of the asset’s total supply.

Amid the Ethereum rally, related high-beta tokens like ARB, ENA, LDO, and OP have surged. LDO showed the largest increase, gaining 58% in a month.

Lido’s success was aided by a statement from the SEC. Officials stated that liquid staking tokens are not securities if services primarily perform a technical function and pass on rewards in full. Analysts emphasized that this is merely the regulator’s position, which may change in the future.

At the time of writing, the Altcoin Season Index stands at 45 out of 100.

Earlier, analysts at Bitfinex suggested that the weak recovery of altcoins following the correction of the leading cryptocurrency cast doubt on the continuation of the altcoin season.