Coinbase’s 2025 Q3 Outlook: Signs of Altcoin Season Approaching
Coinbase, in its latest 2025 Q3 outlook, notes that although we are still in the early stages of the altcoin season, several macro and regulatory positives are brewing conditions for a substantial influx of funds into altcoins. The decline in Bitcoin’s market share, active institutional buying of ETH, and expectations for Federal Reserve rate cuts may ignite this capital rotation trend in September.
Altcoin Season is Coming
As September approaches, the transition to a full-scale altcoin season is likely. Our positive 3Q25 outlook stems from macro trends such as potential Fed rate cuts and expected regulatory advancements. More key themes in this Monthly Outlook report ↓
— Coinbase Institutional ️ (@CoinbaseInsto)August 14, 2025
Bitcoin Market Share Declines: Signs of Fund Rotation Emerge
Coinbase points out that Bitcoin’s market share (BTC.D) has declined from 65% in May 2025 to 59% in August, indicating that market funds are gradually shifting towards the altcoin market.
Although the CMC Altcoin Season Index is still at 44, which is far from the typical altcoin season threshold of 75, the total market capitalization of altcoins has risen by over 50% since early July, reaching $1.4 trillion, showing significant signs of capital rotation.
Coinbase believes that the surge in the market share of open contracts for altcoins depicted in the chart signals the onset of the altcoin season, but the relatively low ratio indicates that it has not fully erupted yet. This initial transition often precedes a full-blown altcoin season.
Focus on Rate Cuts: $7.2 Trillion Cash Expected to Spill Over
U.S. money market funds (MMFs) currently hold up to $7.2 trillion, setting a historical record. This unprecedented level of cash reflects investors’ defensive mindset towards uncertainties in traditional markets, such as trade conflicts, overvaluations, or concerns over economic growth. However, Coinbase analyzes that once the Federal Reserve initiates rate cuts in September and October, the attractiveness of MMF yields may decline, prompting this cash to seek higher-risk and higher-reward opportunities, further driving the cryptocurrency market upward.
Cryptocurrency Liquidity is Reviving
Furthermore, the company’s cryptocurrency liquidity indicator z-score shows that liquidity, based on stablecoin issuance, spot and contract trading volume, and order depth, is on the rise, likely ending the downward trend that has persisted since January.
Review of the Current ETH Narrative: Institutional Buying Leads the Market
In contrast to the weakness of the altcoin season index, the surge in altcoin market capitalization largely stems from institutional demand for Ethereum (ETH). Crypto reserve enterprises (DATs) and narratives surrounding stablecoins and real-world assets (RWA) have become the driving forces behind ETH’s rise.
As of August 13, major ETH reserve companies collectively hold approximately 2.95 million ETH, accounting for over 2% of the total supply. This scale of holdings provides stable buying support for ETH.
Which High Beta Altcoins Stand Out? LDO, ENA
Among the altcoins that are more correlated with ETH, tokens like ARB, ENA, LDO, and OP have daily return beta values exceeding 1. However, only the staking leader LDO has notably benefited from the rise of ETH, with a gain of 58% since August and a beta value of 1.5.
Coinbase believes that LDO’s outstanding performance is attributed not only to staking itself providing institutions with direct exposure to ETH but also benefiting from the U.S. Securities and Exchange Commission (SEC) acknowledging that liquidity staking is not a security a few weeks ago. However, if it involves yield guarantees, secondary staking, or additional yield mechanisms, it may still be considered a security, but the regulatory stance has indeed boosted market confidence in the short term.
September May Be a Key Moment for Altcoin Season
In conclusion, Coinbase maintains a positive outlook for the Q3 cryptocurrency market, believing that the decline in Bitcoin’s market share, institutional buying of ETH, recovering liquidity, and expectations for rate cuts are laying the groundwork for an altcoin season. Although we are still in the early stages of capital rotation, with simultaneous improvements in macro and regulatory environments, September may usher in a more mature and comprehensive altcoin trend. Readers are encouraged to closely monitor fund flows and regulatory developments.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and their prices can be highly volatile; you may lose all of your principal. Please assess the risks carefully.