The altcoin market capitalization has surged over 50% since early July, signaling a potential shift toward a full-scale altcoin season according to Coinbase's August 14 monthly report. Bitcoin's dominance has declined from 65% in May to approximately 59% in August, indicating capital rotation toward altcoins.
Institutional demand for Ethereum (ETH) is a primary driver, with digital asset treasuries now holding nearly 3 million ETH (over 2% of supply). Bitmine Immersion Technologies alone purchased 1.15 million ETH this year backed by a $20 billion fundraising round. This momentum has spilled into ETH-correlated tokens: Arbitrum (ARB), Ethena (ENA), Lido DAO (LDO), and Optimism (OP). LDO surged 58% monthly, partly due to favorable SEC guidance suggesting certain liquid staking services may not be classified as securities.
Coinbase highlights over $7.2 trillion in U.S. money market funds as a catalyst for future inflows, with anticipated Federal Reserve rate cuts in September/October potentially weakening yield appeal and redirecting capital toward crypto. The exchange's liquidity index—tracking stablecoin issuance, trading volumes, and order book depth—has reversed a six-month decline, bolstered by clearer regulatory paths for digital assets.
While the Altcoin Season Index remains at 40—below the 75 threshold indicating a confirmed alt season—Coinbase maintains a constructive Q3 outlook. Declining BTC dominance, institutional ETH accumulation, and improving liquidity could ignite a defined altcoin rally starting September.