Altcoin markets are stealing the spotlight, with the price of Ethereum (ETH) nearly doubling in the last three months and most of the top 50 digital assets outperforming Bitcoin (BTC).

However, analysts warn that this rotation may be reaching a temporary cooling point, even as the broader crypto market cap pushes above $4 trillion.

Ethereum Leads, Altcoins Challenge Bitcoin’s Grip

Market technician Daan Crypto Trades said on X that an alt season is in progress, defining it by a sustained period where alternative cryptocurrencies outpace BTC.

“If we define it by alts outperforming BTC over a period of 3+ months? Then yes,” the analyst stated.

According to him, 78% of the top 50 altcoins have exceeded Bitcoin’s returns across the last three months. This shift is primarily driven by Ethereum, whose nearly 100% climb in that time has stood out while BTC largely traded sideways.

The total crypto market valuation has reflected this strength, climbing back to $4.1 trillion as of September 12, with altcoin valuations near their 2021 highs at $1.7 trillion. However, Daan noted that this run has so far been concentrated in major, large-cap assets and has not yet spread broadly to mid and small-cap tokens, a dynamic that differs from previous cycle manias.

Still, he believes that if the rally is sustained long enough, it will trickle to the smaller assets but not to the level seen previously in 2017 and 2021.

Meanwhile, Bitcoin is trading at just under $115,000, after the latest U.S. CPI data gave it a leg up. However, the more dramatic moves came from assets like Avalanche (AVAX), which jumped almost 17% in a week, and Solana (SOL), which advanced 8% while drawing attention to its growing network liquidity.

Outlook Hinges on Fed Policy and Market Momentum

Even though optimism is running high, some analysts have cautioned that the next major moves depend on macroeconomic factors. For that reason, traders are watching the U.S. Federal Reserve’s September 17 rate decision, with easing inflation raising expectations for possible cuts. A dovish pivot could extend risk-taking into altcoins, while a hawkish tone might stall the rally.

Still, market sentiment remains split. Daan Crypto Trades noted the altcoin market cap is “knocking on the door of the 2021 all-time high” and suggested a breakout could attract new participants. Another analyst, Miles Deutscher, also highlighted that TOTAL3, the altcoin index excluding BTC and ETH, is “on the verge of a major weekly breakout.”

Still, their counterpart Axel Adler Jr. warned that thin liquidity could leave prices vulnerable to abrupt corrections even with a steady upward drift.

For now, Ethereum’s strength and the rotation into high-cap altcoins point to a maturing cycle, where selective plays matter more than blind bets. As Daan put it, “Picking the outperformers will still matter. Not every sector and every coin will go up.”

Whether this trend spills over into mid- and small-cap tokens will likely determine how far the alt season can run.