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Altseason Coming in 2025? Cycles, Indicators, and Macro Dynamics

Aug 26, 2025MEXC

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Since the inception of the cryptocurrency market, cyclical patterns have always been one of its most prominent features. Bitcoin, as the market’s “anchor,” often dictates the rhythm of bull and bear cycles, followed by the rotation of altseason. In 2025, with the popularization of Bitcoin Spot ETFs, participation from institutional funds, and the complex interplay of macro policies, discussions around whether the market will usher in a new altseason in the second half of the year have become increasingly heated.

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1. Historical Pattern Comparison: Classic Cycles vs. Current Differences

1.1 The "Three-Stage" Rule of Classic Cycles

Looking back at the cryptocurrency bull markets of 2017 and 2021, market prices and capital flows roughly followed a three-stage pattern. First, Bitcoin absorbs liquidity. Then Ethereum takes over. And finally, an Altcoin frenzy is triggered.

BitcoinDominance Stage: Bitcoin, as the market leader, first attracts a large amount of liquidity, driving its price sharply upward.

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Ethereum and Large-Cap Altcoin Stage: When Bitcoin's rally slows, market funds start seeking new opportunities. Ethereum, thanks to its position in smart contracts and the DeFi ecosystem, becomes the main beneficiary. At the same time, some large-cap altcoins also perform strongly.

Mid- and Small-Cap Altcoin Frenzy Stage: Market sentiment reaches its peak, and funds—with risk appetite fully unleashed—flow into smaller-cap assets, bringing returns of tens to even hundreds of times, forming the so-called "altseason."

This three-stage pattern was a common feature of the previous two major bull markets and serves as an important reference for investors to assess the position of the market cycle.

1.2 Differences Between the Current Market and Historical Patterns

The market environment in 2025, however, exhibits several notable differences compared with the previous two cycles.

First, institutional capital has become the core driving force of this cycle. The launch of Bitcoin Spot ETFs and Ethereum Spot ETFs has attracted deep participation from major asset management firms such as BlackRock and Fidelity. Bitcoin and Ethereum are increasingly being integrated into institutional macro asset allocation strategies. This shift reduces their sensitivity to standalone price fluctuations while increasing their correlation with traditional risk assets.

Second, the macro liquidity environment is markedly different. Past bull markets often occurred against a backdrop of globally loose liquidity, whereas in 2025 the Federal Reserve is maintaining high interest rates, and liquidity has not been significantly released. This limits the market’s upward momentum compared with historical cycles.

Finally, the issue of insufficient market breadth is prominent. Although ETH has continued to rise recently and outperformed most altcoins, its market share has not yet reached historical peaks, and the overall altcoin market shows weak diffusion effects. This indicates that capital rotation has not widely occurred, and market enthusiasm remains largely concentrated in leading assets.

2. Key Indicator Analysis: Potential Altcoin Season Signals

2.1 Bitcoin Dominance

Bitcoin Dominance (BTC.D) is the core metric for gauging the arrival of an altcoin season. A decline in BTC.D indicates that capital is flowing out of Bitcoin into other cryptocurrencies, particularly altcoins.

TradingView data shows that after a period of upward movement, BTC.D has recently started to pull back, falling to 59% as of August. Historically, when BTC.D drops below 55%, the market typically enters an active altcoin phase. Both the 2017 and 2021 altcoin seasons were triggered around this level. Therefore, the subsequent movement of BTC.D remains a key signal for whether a full-fledged altcoin season is approaching.

2.2 Altcoin Season Index

Another important metric to watch is the "Altcoin Season Index," which quantifies altcoin market activity by measuring the proportion of the top 100 altcoins that have outperformed Bitcoin over the past 90 days.

According to CMC data, the index remained at low levels for most of the past three months, only beginning to gradually rise in the past month, currently hovering around 44. However, this is still far below the 75 needed to signal a full-fledged altcoin season. Comparing with 2021, the Altcoin Season Index back then repeatedly broke above 90 and stayed elevated for over three months, indicating a strong capital rotation effect.

In other words, the current weakness of the Altcoin Season Index reflects that market capital is still concentrated in large-cap assets. On the other hand, the total market capitalization of altcoins has grown by 50% since early July, indicating early signs of capital flowing into the altcoin market.

3. Institutional Behavior and Macroeconomic Policies: Catalysts for Altcoin Season

3.1 Institutional Capital Participation

One of the biggest differences in this cycle compared to previous ones is the deep involvement of institutional players. Institutions like BlackRock and Fidelity hold significant amounts of Bitcoin through Bitcoin ETFs, and their investment decisions have a profound impact on market sentiment. At the same time, Ethereum is gradually gaining institutional acceptance. Data shows that 19 companies, led by Bitmine Immersion Technologies and Sharplink Gaming, collectively hold over 2.42 million ETH, accounting for more than 2% of Ethereum’s total supply, clearly reflecting institutional confidence in ETH for the long term.

The entry of institutional capital brings a stable source of funds to the market on one hand, but on the other hand, it also concentrates capital in top-tier assets, thereby limiting the performance potential of small- and mid-cap altcoins.

3.2 Macroeconomic Policies and Liquidity Changes

Macroeconomic policies remain a key factor influencing the cryptocurrency market. The market generally expects the Federal Reserve to begin a rate-cutting cycle in September and October, and this policy shift could release more retail capital into the crypto market.

Currently, U.S. money market funds have reached a record high of $7.2 trillion. However, since June, their cash balances have rebounded by more than $200 billion, reflecting the cautious stance of investors in a high-interest-rate environment.

Once rate cuts begin, the attractiveness of money market funds will diminish, and some of this capital may flow into higher-risk assets like cryptocurrencies. If this expectation materializes, it could serve as an important external catalyst for an altcoin season.

4. Second-Half Outlook: Potential Paths for Altcoin Season

Overall, the evolution of the altcoin market in the second half of the year can roughly be divided into three phases.

In the short term, capital rotation will mainly manifest in structural opportunities. Ethereum has already broken above $4,700, showing that institutions still favor larger-cap assets. Meanwhile, in narrative-driven sectors, tokens in areas such as AI, RWA, and blockchain gaming have already begun to demonstrate excess returns.

In the medium term, if BTC.D falls further below 55% while the macro environment becomes more accommodative, and regulatory approval for products like Ethereum staking ETFs is realized, a full-fledged altcoin season could officially begin. During this phase, market breadth would expand, with capital flowing more widely into altcoins across different market-cap tiers.

In the long term, this cycle may exhibit a structure different from previous ones. The stability and concentration brought by institutional dominance could sustain rallies in major coins for longer periods, but if market sentiment reverses, declines could also accelerate. Meanwhile, emerging narratives such as decentralized AI and cross-chain communication may give rise to multiple localized mini altcoin seasons, though whether they trigger a full-scale breakout will still depend on macro liquidity conditions.

5. Conclusion: Measured Optimism, Rational Positioning

The outlook for the altcoin market in the second half of 2025 is filled with both opportunities and risks.

Based on current data, a full altcoin season has not yet truly begun, but signs of capital rotation are gradually emerging. ETH's strong performance and notable gains in certain narrative-driven sectors have injected vitality into the market. Whether a true altcoin season will materialize depends on three key factors: whether BTC.D can effectively break below 55%, whether the Fed’s rate-cut pace aligns with expectations, and whether the regulatory environment becomes clearer.

In this context, investors should remain cautiously optimistic. It is advisable to closely monitor indicator changes, select altcoins with long-term value and practical use cases, and avoid blindly chasing short-term hype. At the same time, planning positions and exit points wisely is essential to remain secure when the market tide recedes.

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History in the crypto market may not repeat itself exactly, but its rhythms persist. Only by understanding these cycles can one truly capitalize on periodic wealth opportunities.