As we head into the second half of 2025, Coinbase is optimistic about the potential for a full-scale altcoin season in the crypto markets. Institutional demand for Ethereum is expected to play a key role in driving this shift, with a potential Federal Reserve rate cut in September likely to further fuel retail inflows.
According to Coinbase’s August research outlook, the market has been following the trajectory predicted earlier in the year, with new highs on the horizon. Strong macroeconomic conditions and clearer regulatory frameworks have provided momentum for this growth.
Bitcoin’s market dominance has dipped from 65% in May to around 59% in August, signaling the early stages of capital rotation into altcoins. Altcoin market capitalization has surged over 50% since July, reaching $1.4 trillion.
The Altcoin Season Index, which tracks whether altcoins are outperforming Bitcoin, remains below the threshold that signals a full rotation. However, conditions are aligning for a broader rally as September approaches.
Ethereum has been a major beneficiary of this shift, with its market cap increasing by 50% since July. Demand from digital asset treasuries and a growing narrative around stablecoins and real-world assets have fueled this growth.
Notably, Bitmine Immersion Technologies has acquired 1.2 million ETH after raising $20 billion, surpassing Sharplink Gaming as the leading Ethereum-focused treasury. Top institutional holders now control nearly 3 million ETH, representing about 2% of the total supply.
Tokens closely linked to Ethereum, such as Arbitrum, Ethena, Lido DAO, and Optimism, have followed in ETH’s footsteps. Lido has seen a significant rally, gaining 58% this month, partly due to its exposure to ETH and a US SEC staff statement affirming that liquid staking tokens are not securities under certain conditions.
While institutional flows are driving the Ethereum narrative, Coinbase notes that retail capital is also poised for movement. A record $7.2 trillion is currently held in US money market funds, representing missed opportunities due to high traditional valuations and trade uncertainties. The upcoming Fed rate cuts are expected to redirect capital from money market funds into crypto and other risk assets.
Coinbase’s liquidity index, which tracks stablecoin issuance, trading volumes, orderbook depth, and free float, has started to rebound after six months of decline. This indicates a return of liquidity to the crypto market.
Overall, Coinbase maintains a constructive outlook for the third quarter of 2025, with early signs of capital rotation into altcoins. With the potential Fed rate cut in September and the SEC’s flexibility around certain token models, the conditions for a more significant altcoin season are beginning to materialize.
In conclusion, Coinbase’s research points to a shifting landscape in the crypto market, with Ethereum at the forefront of momentum as we potentially enter a full-scale altcoin season. Stay tuned for further developments in the coming months.