Original Title: Monthly Outlook: Altcoin Season Cometh

Original Author: David Duong, Coinbase

Original Translation: Azuma, Odaily Planet Daily

Key Takeaways

· Our outlook for the third quarter of 2025 remains optimistic, but our view on Altcoin Season has evolved. We believe the current market conditions suggest that as September approaches, the market may shift towards a full-fledged Altcoin Season—our usual definition of Altcoin Season is that at least 75% of the top 50 altcoins by market cap have outperformed Bitcoin in the last 90 days.

· Many have debated whether the Fed's rate cut in September will lead to a local top in the cryptocurrency market, but we do not believe so. Currently, there is a large amount of retail funds sitting idle in money market funds (over $7 trillion) and other channels, and we believe the Fed's accommodative policy may unlock more retail funds to participate in the market in the medium term.

· Keep a close eye on Ethereum (ETH). The discrepancy between "CoinMarketCap's Altcoin Season Index overall weakness" and "Altcoin market cap growth of 50% since early July" largely reflects increased institutional interest in ETH. This is driven by demand from Digital Asset Treasuries (DAT) and the narrative growth of stablecoins and real-world assets.

· While tokens like ARB, ENA, LDO, and OP exhibit higher beta values in their daily returns against ETH, only LDO has significantly benefited in the recent ETH uptrend (up 58% month-to-date). In the past, due to the nature of liquid staking, Lido has provided a relatively direct ETH exposure. Additionally, we believe LDO's rise is supported by the recent SEC statement that, under certain conditions, liquid staking tokens do not constitute securities.

Altcoin Season Approaches

Bitcoin's market dominance has declined from around 65% in May 2025 to about 59% in August 2025, indicating that funds have begun to rotate into altcoins. Despite the total altcoin market cap growing by over 50% since early July (reaching $1.4 trillion as of August 12), CoinMarketCap's "Altcoin Season Index" currently remains around a low level of 40, far below the historical 75 threshold that defines Altcoin Season. We believe that the current market conditions are starting to signal that as September approaches, the market may shift towards a full-fledged Altcoin Season.

Odaily Note: The percentage of open interest in altcoin futures contracts has surged.

Our optimistic outlook is based on a macro perspective and expectations of significant regulatory progress. As we have previously pointed out, changes in the global M2 money supply index often lead Bitcoin's price by 110 days, pointing to a new round of liquidity that may occur in late Q3/early Q4 2025. This is crucial because the narrative for institutional funds still seems to revolve around large-cap coins, while altcoins are mainly supported by retail investors.

It is worth noting that the current size of the U.S. money market funds has reached a record-breaking $7.2 trillion, with cash balances decreasing by $150 billion in April, which we believe drove the strong performance of crypto assets and risk assets in the following months. However, interestingly, cash balances have recovered by over $200 billion since June, contrasting with the rise in cryptocurrency during the same period. Typically, cryptocurrency price increases are often inversely correlated with cash balances.

Odaily Note: The asset size of money market funds has exceeded $7 trillion.

We believe that this unprecedented cash reserve size reflects a missed opportunity cost, mainly due to:

1. Increased uncertainty in traditional markets (arising from issues such as trade conflicts);

2. Market valuations at high levels;

3. Continued concerns about economic growth.

However, as the Federal Reserve is set to implement rate cuts in September and October, we believe the attractiveness of money market funds will begin to wane, with more funds flowing into cryptocurrencies and other high-risk asset classes.

In fact, our cryptocurrency liquidity-weighted Z-score index (based on factors such as stablecoin net issuance, spot and perpetual contract trading volume, order book depth, and free float supply) shows that after six months of decline, liquidity has begun to recover in recent weeks. The growth of stablecoins is partly due to a clearer regulatory environment.

Odaily Note: There are preliminary signs of cryptocurrency liquidity recovery.

ETH Beta Options

Meanwhile, the divergence between the "Alt Season Index" and the "Altcoin Market Cap" mainly reflects institutions' increasing interest in Ethereum (ETH)—a trend supported by the Digital Asset Treasury (DAT) demand and the stablecoin and Real World Asset (RWA) narratives. Bitmine Immersion Technologies alone has purchased 1.15 million ETH and plans to continue accumulating through a raise of up to $20 billion. Another leading ETH DAT, Sharplink Gaming, currently holds approximately 598,800 ETH.

Odaily Note: The amount of ETH held by some Digital Asset Treasury companies.

As of the latest data on August 13, the top ETH treasury companies collectively hold around 2.95 million ETH, which is over 2% of the total ETH supply (120.7 million).

In the Beta options with higher returns relative to ETH, ARB, ENA, LDO, and OP are among the top performers. However, only LDO seems to have significantly benefited from the recent ETH uptrend (rising by 58% month-to-date). Due to the nature of liquid staking, Lido has always provided a relatively direct ETH exposure. Currently, the Beta value of LDO relative to ETH is 1.5—a Beta value greater than 1.0 means that the asset theoretically has greater volatility than the benchmark, which may amplify gains and losses.

Odaily Note: The Beta values of some altcoins compared to ETH.

We believe that the price increase of LDO has also been supported by the U.S. SEC's statement on liquid staking issued on August 5. SEC's Division of Corporation Finance staff stated that when the services offered by liquidity stake entities are essentially ministerial and the staking rewards are distributed on a 1:1 basis per the agreement, such activities do not constitute a securities issuance or sale. However, it is important to note that profit guarantees, self-referral, or additional reward mechanisms may still trigger a securities designation. At the same time, the current guidance only represents the staff's views—future Committee position changes or litigation may alter this interpretation.

Conclusion

We maintain a constructive outlook for the third quarter of 2025, but our assessment of Alt Season has evolved. The recent decline in Bitcoin dominance indicates that funds are tentatively rotating into altcoins, although a full-fledged Alt Season has not yet materialized. However, with the rising total market capitalization of altcoins and early signs of an "Alt Season Index," we believe the market is setting the stage for a more mature Alt Season that may arrive in September. This optimistic view is based on both macroeconomic factors and expectations regarding regulatory progress.

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