Ethereum’s breakout above $4.6K fuels altcoin market rally — Is altcoin season already here?

Ethereum has surged to $4,670, its highest level in nearly 11 months, indicating that the second phase of the altcoin cycle is underway. 

This is according to a CoinGecko blog post published Aug. 12, which notes Ethereum’s (ETH) market dominance has risen to 20.8%, up from 17.5% in May. CoinGecko notes that rotation of capital from Bitcoin (BTC) into altcoins, a hallmark of altseason, is already in motion and advancing faster than in previous cycles.

Capital rotation from BTC to ETH underway

The ETH/BTC trading pair has climbed 14% since May. This phase typically starts when Bitcoin stalls following a strong run, leading investors to switch to Ethereum before pursuing other large-cap altcoins. 

Over the last ninety days, the Altcoin Season Index, which measures the number of top 50 coins that have outperformed Bitcoin, has increased to about 45. The index has shown a V-shaped recovery pattern, recovering sharply from cycle lows, but it is still below the 75-point threshold for “full altseason.” This suggests investor appetite for altcoins is increasing at a faster pace than in past cycles.

The daily trading volume of ETH over the past month has increased by 38% to $22.4 billion, and open interest in ETH derivatives has reached its highest level since March 2024, at $12.1 billion. Increases in open interest have typically been accompanied by faster price rallies in the overall market.

Macro conditions may be adding fuel to altcoin rally

With softer job creation, cooling inflation, and rising expectations for rate cuts by the Federal Reserve later this year, U.S. economic indicators suggest a slowdown. Easing monetary policy frequently increases liquidity and risk appetite, which speeds up altcoin gains, as previous cycles have demonstrated.

This cycle is also being shaped by institutional players. Large wallet holders have rotated from Bitcoin into Ethereum, layer-1 blockchains like Solana (SOL), and infrastructure tokens such as Chainlink (LINK). Unlike the retail-driven surges of 2021, the current rally appears guided by professional capital seeking high-beta assets with strong narratives.

Further supporting the altcoin rally is the shifting liquidity metrics. One important indicator of available liquidity, the global M2 money supply, is currently expanding at its quickest rate since early 2021, which also happened to be one of the strongest altseasons ever. Together with improving technical indicators, this increase in the money supply suggests that altcoin prices may accelerate more sharply.