Bitfinex Alpha believes that the altcoin season index at 45 points favors institutional concentration until regulators approve a broader range of crypto ETFs outside BTC/ETH.
Bitfinex Alpha believes that a genuine altcoin season is unlikely to occur until regulators approve exchange-traded funds (ETFs) for cryptocurrencies beyond Bitcoin and Ethereum, as current market conditions favor institutions continuing to accumulate mature digital assets rather than a broader altcoin rebound.
The latest analysis from the exchange indicates that while Ethereum has set an all-time high above $4,950, a significant capital shift towards higher-risk altcoins is occurring, awaiting the introduction of new investment tools and renewed momentum in Bitcoin.
Current market conditions favor institutional concentration over retail speculation
The altcoin season index currently stands at 45 points (out of 100), remaining firmly in the 'Bitcoin season' zone despite the recent strength of altcoins.
The indicator reached an annual high of 87 during the peak of altcoin performance in December 2024, but as institutional funds concentrated on Bitcoin and Ethereum products, the indicator remained subdued throughout 2025.
Bitfinex Alpha's report on August 25 highlights Ethereum's strong performance following dovish remarks from Federal Reserve Chair Jerome Powell at Jackson Hole, which triggered a widespread short squeeze in digital assets.
Ethereum surged to all-time highs, while Bitcoin consolidated in the range of $111,000 to $123,640.
The accumulation of corporate treasuries continues to drive Ethereum's strength, with total holdings from companies like BitMine and SharpLink Gaming exceeding $10 billion.
However, this institutional demand remains concentrated in established assets rather than spreading to a broader altcoin ecosystem, marking a traditional altcoin season.
ETF liquidity brings structural resistance to the altcoin rebound
In the past week, Bitcoin ETF saw a net outflow of $1.18 billion, while Ethereum ETF recorded a single-day loss of $197 million, marking the second-largest single-day exit on record.
ETF flows have become marginal buyers and sellers of the two main cryptocurrencies, causing institutional investors to attempt to avoid the volatility of smaller altcoins.
One notable development pointed out by Bitfinex is the CFTC's expansion of its 'crypto sprint' program to advance digital asset regulation in the U.S., accepting public comments before October 20 to formulate rules for leveraged and retail cryptocurrency trading beyond spot contracts.
The next phase aims to focus on inter-institutional coordination regarding registration, custody, and trading requirements with the SEC for a unified federal framework.
Without the approval of regulators for altcoin ETFs, institutional capital remains trapped in Bitcoin and Ethereum products.
This structural limitation hinders the broad capital rotation historically associated with altcoin season, which involves retail and institutional funds flowing into smaller cryptocurrencies in search of higher returns.
Similarly, the report emphasizes that Thailand has launched an 18-month pilot program allowing foreign visitors to exchange cryptocurrency for local currency.
Nonetheless, the plan still focuses on established tokens rather than promoting the adoption of altcoins.
The exchange limit for each visitor is approximately $16,950, indicating a cautious approach from regulators towards broader cryptocurrency acceptance.
Compared to previous historical highs, Bitcoin's realized cap growth has significantly slowed.
Current monthly expansion peaked at 6%, while during the breakout of $100,000 at the end of 2024, it was 13%, due to the weakened risk appetite of institutional investors driving the altcoin cycle.
Technical and fundamental factors support a delay in the altcoin season timeline
Market analysts note that historically, a true altcoin season only begins after Ethereum's decisive breakout of its historical high.
The surge in altcoins in 2021 occurred after Ethereum's third attempt to break previous records, triggering a significant capital inflow into assets like Cardano, which rose 400% within a month.
Current market dynamics reflect the situation at the beginning of 2021, with the OTHERS/ETH ratio at a multi-year low, similar to the oversold setup prior to a three-month rebound, when Solana surged 1,200%, Avalanche increased 1,400%, and Axie Infinity skyrocketed 15,000%.
However, the regulatory infrastructure for altcoin investment tools remains underdeveloped.
Therefore, Tim Draper, founding partner of Draper Associates, believes that altcoins ultimately serve as beta testers for Bitcoin improvements, with successful innovations eventually being ported to the dominant network.
He pointed out that Bitcoin's market share increased from over 40% to over 60% across multiple cycles, indicating a growing attraction to the leading cryptocurrency.
However, data from Electric Capital contradicts this, showing that only 2,583 developers are working on Bitcoin, while there are 12,931 developers on the EVM stack and 9,094 developers on Ethereum.
Although these data points show continued interest from venture capital and institutions in DeFi protocols, Layer-1 alternatives, and specialized applications, they lack direct investment tools comparable to Bitcoin and Ethereum ETFs.
Before regulators approve a broader category of crypto ETFs, the catalysts for altcoin season remain limited to retail speculation rather than institutional adoption.
Currently, regulatory restrictions, concentrated institutional flows, and Bitcoin's range-bound behavior create conditions favorable for Ethereum's continued strength, while delaying broader altcoin participation.
A significant amount of capital needs to be redirected to high-risk assets to revitalize Bitcoin's momentum and expand the availability of investment tools beyond the current BTC/ETH products.
