Ethereum (ETH) has been surging in trading volume lately, surpassing Bitcoin (BTC) for the first time since the 2022 cycle low. This indicates an increase in speculative demand in Ethereum, with analysts now anticipating capital rotation into altcoin/ETH trading pairs. Now, analysts believe that the step will flood capital into altcoin/ETH pairs, a tendency that could increase returns twofold, especially for savvy traders.
The strategy is designed to grow Ethereum holdings by trading undervalued altcoin pairs. Once ETH’s price appreciates, traders could earn significant profits. However, timing the entry is critical. A mistimed move could expose investors to double risk – on both ETH and the selected altcoin.
ETH’s Perpetual Volume Dominance Signals Prospected Capital Inflow
According to data by Glassnode, the share of perpetual trading volume of Ethereum surpassed 60% by the end of July. This marks the most persistent volume skew in favor of Ethereum in its history. Furthermore, the surge in perpetual trading volume indicates that traders are growing increasingly bullish around Ethereum instead of Bitcoin.
“For the first time since the 2022 lows, #Ethereum perp volume has overtaken #Bitcoin. It’s not just a blip – this marks the highest volume dominance $ETH has ever had vs $BTC,” Crypto Potato shared on X.
Market analysts explain this shift as a Phase 2 of a typical crypto capital cycle. Phase 1 is Bitcoin dominance, Phase 2 is rotation and moving into ETH, and Phase 3 is associated with capital flows into altcoins. This thesis has received support from several analysts, including Benjamin Cowen and Colin Talks Crypto.
Cowen observed that pairs that include altcoins/ETH have dropped by an average of 40% since the peak in 2025. He attributed this declination to prolonged outperformance by ETH and indicated that the trend can be sustained provided ETH sustains the momentum.
“If you bought ETH when it went home and feel like you are missing out on ALT rallies, consider this: The collective altcoin market is down 40% against ETH since ETH went home. We are at the “yes your alt went up, but does it bleed against Ethereum” phase of the cycle,” he noted.
Colin Talks Crypto also echoed this sentiment, noting that this era of crypto can be viewed as an ‘ETH season’. He predicted a probable scenario where altcoins will outperform significantly compared to ETH until the later part of the bull run when it would result in capital flowing into lower-ranked coins.
It’s ETH Season.$ETH may outperform lower ALTS for a while yet.
if I were to take a guess, I’d say the path will go something like this, down to the lower trend line. When this line drops it means ALTs lose value relatively to ETH.
Only in the very final stage of the bull run… https://t.co/nkvvFHbP8Z pic.twitter.com/VHfiJf2ElU
— 𝙲𝚘𝚕𝚒𝚗 𝚃𝚊𝚕𝚔𝚜 𝙲𝚛𝚢𝚙𝚝𝚘 🪙 (@ColinTCrypto) July 18, 2025
Key Metrics to Watch Out to Determine Altcoin/ETH Rotation
To time the shift into the altcoin/ETH pairs, traders must monitor both the behavioral pricing and market structure. The performance of the total crypto market cap excluding BTC and ETH (TOTAL3) versus ETH, is one key indicator to watch.
Traders must also follow the ratio of the market cap of OTHERS (excluding top 10 coins) to ETH closely. This ratio has surged to 0.26 over the last month, as per data by TradingView. This highlights that mid- and low-cap altcoins are growing in popularity. A continued rise in this metric could mark the early stage of a capital shift.
Rekt Fencer, another market analyst, suggested a more specific threshold. He expects ETH to climb toward the $7,000 – $8,000 range before traders begin rotating into altcoin/ETH pairs in large numbers. This level would signal that ETH’s run is maturing and that altcoins may offer better risk-reward opportunities.
“Everyone is obsessed with ALTS/BTC. The chart you should ACTUALLY be watching is ALTS/ETH. It’s at a make or break level right now. Alts don’t run unless ETH leads the way. So for now the best play is to hold $ETH itself. And when it gets to $7-8k, rotate into alts,” Fencer predicted.
Despite these signs, short-term rallies in altcoin/ETH pairs are expected to remain limited. The majority of profits will occur towards the end of the cycle when the ETH goes into a quieter growth stage and capital seeks more attractive returns elsewhere.
An eventual break in ETH’s dominance will most likely precede a rotation into the alternative assets. As such, mid-cap and low-cap altcoin pairs, many of which have lagged ETH – may provide the best opportunities for relative gains.
The capital rotation cycle appears to be in motion. While conditions are not yet optimal for altcoin/ETH pairs, market data shows that preparation for the next phase is underway. Crypto investors are now positioning in anticipation of capital rotation into altcoins, sparking a full blown altcoin season.
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