According to a new report from Coinbase analysts, the market is starting to show signs of capital rotation toward altcoins. Since May 2025, Bitcoin’s market share has dropped from 65% to 59%, while the combined market capitalization of altcoins has grown by more than 50%, reaching $1.4 trillion as of August 12. The CoinMarketCap altseason index remains below its historical threshold, but the market structure suggests the trend could accelerate as early as September.
Liquidity Growth and Investor Readiness
Coinbase analysts believe the catalyst for growth could be a combination of macroeconomic factors and expectations of regulatory changes. They note that the global M2 money supply index compiled by Coinbase typically leads Bitcoin by 110 days and indicates a potential liquidity wave by the end of Q3 or early Q4 2025. This is especially relevant given the growing concentration of institutional capital in large assets and the role of retail investors in supporting altcoins.
The report states that US money market funds currently hold a record $7.2 trillion. In April, $150 billion was withdrawn, likely fueling the crypto market’s growth in the following months. Since June, fund volumes have risen again by $200 billion despite the continued increase in digital asset prices. Typically, there is an inverse relationship between crypto price growth and money supply expansion.
Potential for Capital Reallocation
Coinbase attributes this unusual situation to investors avoiding allocations due to instability in traditional markets, overpriced assets, and concerns over economic growth. However, with an expected Fed rate cut in September-October, interest in risk assets, including cryptocurrencies, could increase. Market liquidity has also started to recover after a six-month decline, as seen in the growth of stablecoin trading volumes and order book depth.
Ethereum and Growing Institutional Interest
The gap between the altseason index and market cap growth is partly explained by rising institutional interest in Ethereum (ETH). According to analysts, this is confirmed by ETH accumulation by digital treasury entities. Bitmine Immersion Technologies acquired 1.15 million ETH using funds from a new $20 billion investment round and may increase the purchase to $24.5 billion. The previous leader in ETH treasury holdings, Sharplink Gaming, owns 598,800 ETH.
As of August 13, the largest institutional ETH holders control 2.95 million ETH - more than 2% of the total supply of 120.7 million ETH.
Altcoins With High Correlation to ETH
Among altcoins showing the highest volatility relative to ETH, analysts highlighted ARB, ENA, LDO, and OP. Only LDO (Lido DAO) recorded significant growth in August - up 58% since the start of the month. This is driven by the ease of accessing ETH through liquid staking, as well as a beta coefficient of 1.5, indicating stronger price swings compared to ETH.
An additional factor was an SEC comment on August 5. Corporate Finance Division staff stated that providing liquid staking is not considered a securities offering if it is limited to the technical execution of operations and direct reward distribution from the protocol. However, guaranteed yield, restaking, or other schemes with additional profit may fall under regulation.
Outlook for the Rest of the Quarter
Coinbase estimates that current conditions do not yet indicate a full-scale altseason but create the groundwork for a stronger trend in the coming weeks. If macroeconomic support continues and regulatory positions become clearer, capital could keep flowing from Bitcoin into higher-risk altcoins.
This post is for informational purposes only and is not an ad or investment advice. Please do your own research making any decisions
