Bitcoin weakness, surge in altcoin contract positions, is the frenzied altcoin season imminent?
Written by: UkuriaOC, CryptoVizArt, Glassnode
Compiled by: AididiaoJP, Foresight News
Summary
Despite Bitcoin reaching a new all-time high of $124,400, its capital inflows continue to decline. This period of weak capital inflows highlights a significant reduction in investor demand willingness at this stage.
As Bitcoin prices reached an all-time high, the total open contracts for mainstream altcoins also reached a historical peak of $60 billion, highlighting the high level of market leverage. However, this situation is temporary, as prices retraced and open contracts decreased by $2.6 billion, marking the tenth-largest drop on record.
Ethereum is often seen as a bellwether asset, with periods of superior performance typically associated with the broader 'altcoin season' phases in the digital asset market. Notably, Ethereum's open contract dominance has reached the fourth-highest level on record, while its perpetual futures trading volume dominance has surged to a new all-time high of 67%.
When we observe Bitcoin's performance from each cycle's low point, we can see that during the 2015-2018 and 2018-2022 cycles, the time to reach all-time highs was approximately 2-3 months later than where we currently are in this cycle.
Capital flows slow down
Following last week's peak of $124,400, Bitcoin's upward momentum has stalled, with prices retreating to a low of $112,900, a nearly 9.2% pullback. This decline has accompanied noticeably weak capital inflows in recent weeks, indicating a reluctance among investors to inject new funds at these high price levels.
When we compare the current capital inflow rate to previous instances of breaking all-time highs, we find that the percentage growth of realized market cap is significantly lower than levels seen during the March and December 2024 all-time high breakthroughs. In late 2024, when it first broke $100,000, the monthly growth rate of realized market cap reached +13%, while the peak of the current environment is much lower at only +6%/month.
This period of weak capital inflows highlights a significant reduction in investor demand willingness at this stage.
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Profit-taking activity has also declined in recent weeks, which can be observed through the volatility-adjusted net realized profit/loss metric. This tool measures realized profits and losses in Bitcoin (BTC) and normalizes them against the increasing market value of Bitcoin across different cycles. It further refines this by adjusting for 7-day realized volatility to account for the diminishing returns and slowing growth rates as Bitcoin matures.
Notably, we can observe three instances of large-scale profit-taking near the breakout points of $70,000 and $100,000 in 2024, as well as near the all-time high of $122,000 reached in July this year. These events indicate a strong willingness among investors to lock in substantial profits, but the demand impulse to absorb this selling supply is equally robust.
In contrast, during this latest attempt at an all-time high, the realized profit-taking volume has significantly decreased. One interpretation of this dynamic is that while selling pressure from existing holders is less, the market has failed to maintain upward momentum.
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As local market momentum reverses and prices continue to decline, we shift our attention to realized loss events to assess whether there has been any significant negative change in investor sentiment. During this local downtrend, investors' realized losses have accelerated, reaching a value of $112 million per day.
However, this still falls within the typical range observed during local pullbacks in the overall bull market cycle, where many events, such as the yen arbitrage liquidation in August 2024 and the 'Trump tariff panic' from March to April 2025, led to significantly higher surrender volumes.
This suggests that while rising losses may begin to challenge this view, the current downtrend has not yet had a substantial impact on investor confidence.
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Leverage-driven decline
Although realized profits and losses on-chain remained relatively flat during the recent formation of all-time highs and the subsequent pullback, activity in the futures market has accelerated. The total open contracts for Bitcoin futures remain high at $67 billion, highlighting the high level of leverage present in the current market.
Notably, in the recent sell-off, over $2.3 billion in open contracts were liquidated, with only 23 trading days recording larger nominal declines. This underscores the speculative nature of the market, where even mild price fluctuations can trigger significant contractions in leveraged positions.
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Delving deeper, we can assess the total scale of long and short liquidations during the formation of the all-time high and the subsequent price contraction.
Despite a rise in liquidation volume during these events, short liquidations peaked at $74 million during the all-time high, while long liquidations hit $99 million during the downward trend. However, these levels are significantly lower than those seen during similar periods of extreme price volatility earlier this year. This suggests that a considerable portion of recent contract liquidations may have been voluntary, thus managed through risk management, rather than driven by forced liquidations caused by excessive leverage being wiped out.
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When we evaluate the futures open contracts of major altcoins (ETH, SOL, XRP, DOGE), we note that their total surged to a new historical high of $60.2 billion over the last weekend. This is almost on par with the open contract size of Bitcoin. However, this situation is temporary, as it subsequently retraced, decreasing open contracts by $2.6 billion, marking the tenth-largest drop on record.
These rapid fluctuations indicate that altcoins are currently drawing a significant amount of investor attention, significantly exacerbating the reflexivity and fragility of the digital asset market.
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Moreover, the total liquidation volume of mainstream altcoins has recently been quite high, peaking at $303 million per day, and the liquidation volume experienced is more than twice that of the Bitcoin futures market.
Additionally, the liquidation volume from last weekend now ranks as the 15th largest on record, indicating an increased willingness to expose oneself to leverage in the altcoin space.
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Increased speculation
For years, Ethereum has often been seen as a bellwether asset, with periods of superior performance typically associated with broader phases of 'altcoin season' in the digital asset market.
This relationship can also be observed through the dominance of open contracts between Bitcoin and Ethereum, reflecting changing risk preferences among market participants. As it stands;
Bitcoin open contract dominance: 56.7%
Ethereum open contract dominance: 43.3%
Ethereum's share of open contracts has recently been surging, indicating that market attention is significantly shifting towards further out on the risk curve. Notably, Ethereum's open contract dominance has reached the fourth-highest level on record, highlighting a significant increase in speculative activity. It is important to note that as the second-largest digital asset, Ethereum is one of the few assets capable of absorbing institutional-sized capital.
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When viewed through the lens of trading volume, this trend becomes even more astonishing. The dominance of Ethereum's perpetual futures trading volume has surged to a new all-time high of 67%, marking the strongest shift on record.
Such significant trading activity has rotated investor attention toward the growing interest in the altcoin space, pointing to an acceleration of risk preference within the current market cycle.
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Crossroads
When we observe Bitcoin's performance from each cycle's low point, we can see that during the 2015-2018 and 2018-2022 cycles, the time to reach all-time highs was approximately 2-3 months later than where we currently are in this cycle.
While these are just two examples prior to a mature cycle, which is insufficient to assume this synchronicity will continue, it remains a noteworthy data point. This perspective is particularly relevant when considering the wave of profit-taking on-chain over the past two years, alongside the high levels of speculative activity visible in today's derivatives market.
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To further support this observation, we can look at the length of time the percentage of Bitcoin's circulating supply has remained above +1 standard deviation in each cycle.
In the current cycle, this period has now extended to 273 days, making it the second longest on record, only surpassed by the 335 days of the 2015-2018 cycle. This indicates that when measuring from the perspective of the majority of supply held at a profit, the current cycle's duration is comparable to previous cycles.
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We can also measure the cumulative profits realized by long-term holders from the time they reached new cycle highs to the eventual peak of the cycle. From this perspective, we find that the group of long-term holders (often most active at extreme points in the cycle) has realized more profits than all previous cycles except one (the 2016-2017 cycle).
This observation aligns with previous indicators, adding another dimension through the lens of selling pressure. Taken together, these signals reinforce the view that the current cycle is in its historical late stages.
However, each cycle has its own characteristics and cannot guarantee that market behavior will follow this fixed time pattern.
Nevertheless, these dynamics raise an interesting question. Does the traditional four-year cycle continue to hold, or are we witnessing its evolution? Answers to these questions will emerge in the coming months.
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Conclusion
Bitcoin's capital inflows show signs of weakness, with demand declining even as prices reached a new all-time high of $124,400. This slowdown in willingness coincides with a surge in speculative positions, with the total open contracts of major altcoins briefly reaching a historical high of $60 billion, followed by a retracement of $2.5 billion.
Long regarded as a bellwether for 'altcoin season', Ethereum is once again at the forefront of this rotation. Its open contract dominance has risen to the fourth-highest level on record, while its perpetual futures trading volume dominance has skyrocketed to a new all-time high of 67%, marking the strongest structural shift to date.
From a cyclical perspective, Bitcoin's price movements also echo previous patterns. In the 2015-2018 and 2018-2022 cycles, the time to reach all-time highs from cycle lows was only about 2-3 months later than where we currently stand. Meanwhile, the profit levels realized by long-term holders are comparable to those during past market frenzy phases, reinforcing the impression that the market is in the late stages of the cycle.
Overall, these signals highlight elevated leverage, profit-taking, and increased speculative intensity, all hallmarks of historically mature market stages. However, each cycle has its own characteristics and cannot guarantee that Bitcoin and the broader market will follow a fixed time blueprint.
