Will the alt season arrive late? Institutional funds may become a new breakthrough for rotation.

Author: Bybit Research

Main Highlights:

Our latest quarterly report shows a significant deviation from the historical cycles of the cryptocurrency market: Bitcoin continues to dominate, and despite multiple occurrences of historical highs, it has not triggered the traditional off-season.

In the previous rebound after the halving, funds have typically rotated into other coins as traders sought higher Beta exposure. However, in the current cycle, BTC's dominance remains on the rise, while alternative coins have struggled to achieve significant performance. This shift is primarily attributed to the increasing influence of institutional investors. With ETFs, corporate funds, and asset managers entering the space, Bitcoin has become the preferred tool for regulated exposure.

Is the altcoin season coming soon? If this happens, there will be a delay.

Figure 1. ETH's share of non-stablecoin cryptocurrencies before and after historical halving events (excluding 2012)

The proportion of total market capitalization. Source: CoinGecko, Block Scholes

Although the altcoin season has not yet materialized in this cycle, the market is gradually adjusting to achieve a more systematic rotation. Since April 2025, supported by a significant influx of ETFs and increasing regulatory transparency, Ethereum has outperformed most alternative coins, especially in terms of staking.

However, the breadth of altcoins remains weak, with ETH's market share still below the peak levels of historical bull seasons. The delayed rotation is attributed to structural changes in market participation, with institutions showing a preference for large-cap assets and longer holding periods. The potential approval of a staked ETH ETF could serve as a catalyst, marking a transition to a more selective, quality-oriented altcoin season.

Despite the rise and fall of Bitcoin, it remains unchallenged.

Figure 2. BTC dominated before and after historical halving events (excluding 2012).

Source: CoinGecko, Block Scholes

The role of Bitcoin in the cryptocurrency ecosystem is changing. Its dominance remains at a high level, reflecting the increasing attractiveness of it as a macro asset for institutional investors. The launch of the BTC spot ETF has brought in more stable long-term capital, reduced volatility, and suppressed speculative inflows into altcoins. BTC now plays a lesser role as a cyclical trigger for alternative seasons and more as a cyclical trigger for liquidity anchors. Its correlation with traditional risk assets has increased, indicating that Bitcoin's price is more aligned with the global macro environment compared to its intrinsic sentiment in the cryptocurrency market.

When can we expect it if the altcoin season has not yet arrived?

Figure 3. From November 2023 to February 2025, the share of the market capitalization of non-stablecoin cryptocurrencies, calculated by BTC (orange), ETH (purple), and all other cryptocurrencies (red), with the market capitalization of non-stablecoins calculated on a logarithmic scale (white, right axis). Source: CoinGecko, Block Scholes.

Purchasers should pay attention to several key indicators in order to achieve alternative trading and broader market rotation:

The inflow of ETFs into ETH and any future products supporting staking is a key signal of institutional sentiment.

Global liquidity indicators, central bank interest rate expectations, and stock market performance provide a macro backdrop for risk behavior.

The continuous rise of ETH's dominance in the cryptocurrency market, the expanding interest in derivatives of altcoins, and the broadening of mid-cap assets are all key technical indicators.

Traders should also monitor changes in volatility spread and funding rates, as changes in volatility spread and funding rates may precede capital shifting towards higher β altcoins.

Source: Bybit Research