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Market snapshot: Altcoins rally as Bitcoin dominance eases
Coinbase's latest monthly market report, published Aug. 14, highlights a more than 50% rise in the combined altcoin market capitalization since early July — a move that has renewed discussion about a possible altcoin season. At the same time, Bitcoin's share of the total crypto market has slid from roughly 65% in May to about 59% in August, signaling a potential rotation of capital into alternative tokens.
Altcoin Season Index and current readings
While CoinMarketCap's Altcoin Season Index remains in the low 40s — well below the common 75 threshold typically used to define a full-blown altcoin season — Coinbase argues that macro and liquidity dynamics are increasingly conducive to an extended rally for altcoins as the market heads into September.
Institutional flows concentrate on Ethereum and correlated tokens
Coinbase points to growing institutional demand for Ethereum (ETH) as a primary driver behind the recent strength in altcoins. Corporate and institutional treasuries now hold close to 3 million ETH, representing just over 2% of the total supply. One notable buyer, Bitmine Immersion Technologies, reportedly acquired 1.15 million ETH this year following a $20 billion fundraising round, underscoring heightened institutional appetite for ETH exposure.
Winners among ETH-correlated tokens
This institutional interest has spilled into tokens with high correlation to ETH's daily returns, including Arbitrum (ARB), Ethena (ENA), Lido DAO (LDO), and Optimism (OP). Lido has emerged as a standout, climbing roughly 58% month-to-date, driven partly by its role in liquid staking and aided by recent guidance from the U.S. Securities and Exchange Commission suggesting that some liquid staking services may not be classified as securities.
Liquidity, money market funds, and retail flows
Liquidity conditions could further amplify the altcoin narrative. Coinbase highlights that U.S. money market funds currently hold over $7.2 trillion, an all-time high. With expectations that the U.S. Federal Reserve may lower interest rates in September and October, yields on cash and money market instruments could decline, potentially releasing retail capital to seek higher returns in crypto and other risk assets.
Stablecoins and the liquidity index
Coinbase's liquidity index, which tracks stablecoin issuance, trading volumes, and order book depth, has turned upward after a six-month decline. A clearer regulatory framework for stablecoins and digital assets could sustain this improvement, supporting deeper markets and easier on-ramps for new capital.
Outlook: Constructive, but not a definitive call
Although Coinbase stops short of declaring a confirmed altcoin season, the exchange maintains a constructive view for Q3 2025. The combination of falling Bitcoin dominance, renewed institutional Ethereum activity, and recovering liquidity could create favorable conditions for a more defined altcoin rally in the months ahead. Traders and investors should watch ETH inflows, LDO and other ETH-linked tokens, stablecoin supply, and macro rate actions for signals that a broader rotation into altcoins is accelerating.
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