Original Author | David Duong, Coinbase
Translated | Odaily, Azuma
Original Title | Coinbase Report: $7 Trillion Cash Poised, Altcoin Season May Arrive in September
Core Summary
We remain optimistic about the third quarter of 2025, but our view on the altcoin season has evolved. We believe the current market conditions indicate that as September approaches, the market may shift towards a comprehensive altcoin season - our usual definition is that at least 75% of the top 50 altcoins have outperformed Bitcoin in the past 90 days.
Many argue whether the Fed's September rate cut will lead to a local top in the cryptocurrency market, but we do not think so. Currently, there is a large amount of retail funds idle in money market funds (over $7 trillion) and other channels, and we believe the Fed's loose policy may release more retail funds to participate in the market in the medium term.
Focus on Ethereum (ETH). The divergence between the "overall low CoinMarketCap Altcoin Season Index" and the "50% growth in total altcoin market cap since early July" largely reflects increased institutional interest in ETH. This is due to the demand for Digital Asset Treasury (DAT) and the growth of stablecoin and real-world asset narratives.
Although tokens like ARB, ENA, LDO, and OP show higher beta values for daily returns relative to ETH, only LDO seems to have significantly benefited from the recent ETH price increase (up 58% so far this month). In the past, Lido provided a relatively direct ETH exposure due to the nature of liquid staking. Additionally, we believe LDO's rise is due to the SEC's statement - liquid staking tokens do not constitute securities under certain conditions.
I. Altcoin Season Approaching
Bitcoin's market dominance has dropped from 65% in May 2025 to about 59% in August 2025, indicating that funds have begun to rotate into altcoins. Although the total altcoin market cap has grown by over 50% since early July (reaching $1.4 trillion as of August 12), CoinMarketCap's "Altcoin Season Index" remains low at around 40, far below the historical 75 threshold for defining an altcoin season. We believe the current market conditions have begun to suggest that the market may shift towards a comprehensive altcoin season as September approaches.
Odaily Note: Surge in altcoin open interest ratio.
Our optimistic outlook is based on a macro perspective and expected regulatory developments. We previously noted that changes in the global M2 money supply index often lead Bitcoin prices by 110 days, pointing to a potential new liquidity cycle in late Q3/early Q4 2025. This is crucial because for institutional funds, the narrative still seems to revolve around large cryptocurrencies, while altcoins are mainly supported by retail investors.
Notably, the size of U.S. money market funds has reached a record $7.2 trillion, with cash balances decreasing by $15 billion in April, which we believe drove the strong performance of crypto and risk assets in subsequent months. Interestingly, cash balances have rebounded by over $20 billion since June, contrasting with the cryptocurrency price increase during the same period. Typically, cryptocurrency prices and cash balances are negatively correlated.
Odaily Note: Money market fund assets have exceeded $7 trillion.
We believe this unprecedented cash reserve scale reflects missed opportunity costs, mainly due to:
1. Increased uncertainty in traditional markets (caused by trade conflicts, etc.);
2. High market valuations;
3. Ongoing concerns about economic growth.
However, as the Fed is set to implement rate cuts in September and October, we believe the attractiveness of money market funds will begin to weaken, and more funds will flow into cryptocurrencies and other high-risk asset classes.
In fact, our crypto liquidity-weighted Z-score indicator (based on stablecoin net issuance, spot and perpetual contract trading volume, order book depth, and free float) shows that liquidity has begun to recover in recent weeks after declining for six months. The growth of stablecoins is partly due to the clarifying regulatory environment.
Odaily Note: Initial signs of cryptocurrency liquidity recovery.
II. ETH's Beta Options
Meanwhile, the divergence between the "Altcoin Season Index" and "Total Altcoin Market Cap" mainly reflects growing institutional interest in Ethereum (ETH) - supported by Digital Asset Treasury (DAT) demand and stablecoin and real-world assets (RWA) narratives. Bitmine Immersion Technologies alone has already purchased 1.15 million ETH, with plans to continue acquiring through financing up to $20 billion. Another DAT leader, Sharplink Gaming, currently holds about 598,800 ETH.
Odaily Note: ETH holdings of some digital asset treasury companies.
As of August 13, the top ETH treasury companies collectively hold about 2.95 million ETH, over 2% of the total ETH supply (12.07 million).
Among the high-beta options relative to ETH returns, ARB, ENA, LDO, and OP are at the forefront, but only LDO seems to have significantly benefited from the recent ETH price increase (up 58% so far this month). Due to the nature of liquid staking, Lido has always provided a relatively direct ETH exposure, with LDO's current beta relative to ETH at 1.5 - a beta value greater than 1.0 means the asset is theoretically more volatile than the benchmark, potentially amplifying gains and losses.
Odaily Note: Beta values of some altcoins relative to ETH.
We believe LDO's price increase is also supported by the SEC's statement on liquid staking on August 5. SEC Corporate Finance staff noted that when liquid staking entities provide services that are essentially "ministerial" and staking rewards are distributed 1:1 according to the agreement, the related activities do not constitute securities issuance or sale. However, it's important to note: yield guarantees, autonomous re-staking, or additional reward mechanisms may still trigger securities classification. Additionally, the current guidance only represents staff views - future committee stance changes or litigation cases may alter this interpretation.
III. Conclusion
We maintain a constructive outlook for the third quarter of 2025, but our judgment of the altcoin season has evolved. The recent decline in Bitcoin's dominance indicates that funds are initially rotating towards altcoins, but a comprehensive altcoin season has not yet formed. However, as the total market value of altcoins rises and the "altcoin season index" shows early positive signals, we believe the market is creating conditions for a more mature altcoin season that may arrive in September. This optimistic assessment is based on both macroeconomic factors and expectations of regulatory progress.
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