The market is still heavily betting on altcoins.
Following Q3’s 35% rally in TOTAL2, this bullish argument does not seem so far-fetched. The Altcoin Season Index also closed Q3 around 61, recovering the levels last seen in late Q2, while the BTC.D stayed well below 60.
This setup is keeping the broader altcoin rally narrative alive heading into Q4.
As the post below mentions, analysts are now expecting a bigger altcoin move to happen based on the historical technical setup. Notably, the index has already broken out sharply above 50, recording six consecutive weeks of higher highs, while Bitcoin is still struggling to break above $90k.
Should this structure hold, it could very well be the sign of the next strong altcoin rotation.
Naturally, this places emphasis on Ethereum [ETH] as the largest altcoin.
Interestingly, ETH/BTC started October by encountering resistance around 0.03, decreasing over 2.33% from its early-September peak of 0.033.
Unless ETH/BTC can break above this level, capital rotation into Ethereum may continue to be limited, which is of greater significance as Bitcoin continues to consolidate.
Historically, capital tends to rotate into Ethereum whenever Bitcoin’s risk-reward setup begins to appear less attractive. However, this scenario is not playing out just yet.
The key question now is whether Ethereum can break the ETH/BTC resistance and lead the next altcoin rotation or if the market risks a downward swing.
Ethereum faces a critical bear trap test
Looking at Ethereum’s current setup, the altcoin market may be getting ahead of itself.
According to CryptoQuant, the stablecoin market cap is still down nearly from its May peak. Without fresh capital flowing into USDT, bids on ETH, SOL, XRP, and a slew of other altcoins cannot provide the liquidity needed to propel the rally higher.
Notably, this also lines up with weakening spot demand for Ethereum, as ETH ETFs witnessed $17.25 million in outflows, and on-chain insights suggest heavy distribution. Altogether, it indicates that the altcoin’s recent bullish move could be ahead of Spot demand.
The key takeaway? These outflows occurred at the time when Bitcoin saw $31.7 million in net inflows. This suggests that the institutional capital is flowing into BTC rather than ETH, which could hurt Ethereum’s bullish scenario.
Against this backdrop, the rising FUD surrounding Ethereum begins to carry more weight.
With long positions diverging from the technical and rotation context, ETH’s consolidation near $2.7k looks like a bear trap that can spook late-leveraged longs and drive a downward spiral if Spot weakness persists.
In turn, this could trigger a cascade that would spill into the broader altcoin market, leaving the Altcoin Season Index without enough momentum for an “altcoin cycle” to emerge.
Final Summary
- Ethereum’s weak Spot demand and ETF outflows are challenging the broader altcoin rally.
- If ETH breaks lower, rising leverage could trigger a wider altcoin unwind.