According to the latest monthly outlook report from the institutional division of the U.S. cryptocurrency exchange Coinbase, the full onset of altcoin season may be just weeks away. The company predicts that from September, other cryptocurrencies will replace Bitcoin (BTC) as the dominant force in the market.
The so-called 'altcoin season' refers to a phase where the market enters a stage led by cryptocurrencies other than Bitcoin (usually led by Ethereum, SOL, and other large-cap coins), during which the percentage increase of altcoins significantly surpasses that of Bitcoin.
This report, authored by David Duong, the head of global research at Coinbase, and released on Thursday, identifies three main factors driving the market: the decline in Bitcoin's market share, improved liquidity, and investors' greater willingness to turn to high Beta assets. Duong views this as a cyclical transition, as market confidence builds, with capital flowing down the risk curve.
Decline in Bitcoin's market share
Bitcoin's market share (i.e., its share of the total cryptocurrency market capitalization) has shown signs of decline after peaking earlier this year, decreasing from about 65% to the current level of around 59%. Coinbase believes this indicates an early phase of capital flowing towards altcoins.
Coinbase's report states:
The CoinMarketCap Altcoin Season Index is currently only in the low 40s, far below the historical threshold of 75 points used to determine an altcoin season, even though the total market capitalization of altcoins has risen by over 50% since early July, reaching $1.4 trillion as of August 12. We believe that as September approaches, current market conditions are beginning to show signs of a potential transition to a full altcoin season.
CMC Altcoin Season Index, Source: CoinMarketCap Fund Rotation Situation
Coinbase believes that historically, when Bitcoin's market share declines, funds often first flow into large-cap altcoins, followed by mid and small-cap coins, and they expect this fund rotation effect to become more pronounced in September.
Liquidity trends are also more favorable for altcoins. Coinbase points out that the bid-ask spreads across major exchanges are narrowing, and order depth is increasing, making it easier for traders to enter and exit altcoin positions without incurring excessive slippage. Improved liquidity typically attracts large investors who would otherwise avoid trading obscure tokens.
The third factor is market sentiment. Duong writes that when the macro environment stabilizes and volatility remains within manageable limits, investors are more likely to seek higher-risk crypto assets in pursuit of higher returns. If Bitcoin's price enters a consolidation phase rather than continuously reaching new highs, such an environment is more likely to facilitate sustained capital inflow into the altcoin market.
Coinbase does not explicitly predict which tokens will lead the charge, but they emphasize patterns from past market cycles — blue-chip altcoins often outperform the market first, followed by small-cap assets taking over the upward trend.
The report also notes that while September may mark the beginning of altcoin trends, the duration and extent of this trend will still depend on market conditions and macroeconomic factors.
Bitcoin (BTC) has risen 27.2% so far this year, but this increase lags behind some major altcoins, such as Ethereum (ETH) which is up 37.9%, and Ripple (XRP) which is up 49%; meanwhile, SOL has only risen 1.67%, ADA is up 8.96%, and Dogecoin (DOGE) has fallen 27.5%. Coinbase believes that overall market conditions may favor a broader shift of funds towards altcoins in the coming months.
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Related report: (GT Radar Weekly Report 8/13: Operational Thinking Under Ethereum's Continued Highs | What Sectors to Focus on During Altcoin Season?)
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