Coinbase said that the third quarter 2025 outlook remains constructive, even as its view on an altcoin season has evolved.

The crypto exchange added that the current market conditions now suggest a potential shift towards a full-scale altcoin season as September nears.

Altcoin Rotation

In its latest research, Coinbase explained that Bitcoins market dominance had fallen from 65% in May 2025 to around 59% by August. This indicates early signs of capital rotation into altcoins. CMCs Altcoin Season Index also remains in the low 40s, below the 75 threshold that historically points to an altcoin season, even as the total altcoin market cap has risen over 50% since early July to $1.4 trillion as of August 12.

These trends suggest that conditions may be moving toward a more widespread altcoin season heading into September.

Coinbase also highlighted that liquidity trends are becoming more favorable for altcoins, and noted improvements in order book depth, higher spot and perpetual trading volumes, and reduced slippage.

These factors make it easier for investors to execute trades without significant price impact, which supports broader market participation in altcoins and, hence, a potential momentum toward a full-scale altcoin season.

Altcoin Season Divergence

Coinbase noted that the divergence between the Altcoin Season Index and total altcoin market capitalization largely reflects growing institutional interest in Ethereum (ETH). This demand is driven in part by digital asset treasuries (DATs) and the broader narrative around stablecoins and real-world assets (RWAs).

For example, Bitmine Immersion Technologies has purchased 1.15 million ETH through a new $20 billion raise, giving it the capacity to acquire up to $24.5 billion worth of ETH. Similarly, Sharplink Gaming, a former leader in ETH DATs, now holds approximately 598,800 ETH.

Regarding higher-beta assets tied to ETH, tokens such as ARB, ENA, LDO, and OP are the most sensitive. In fact, LDO showed the strongest response to the recent ETH rally, by gaining 58% month-to-date. LDO offers relatively straightforward exposure to ETH through liquid staking, and currently sits at a beta of 1.5, meaning its price tends to be 50% more volatile than ETH. This helps amplify both potential gains and losses.

Coinbase also stated that LDOs recent appreciation was further supported by a US SEC statement on liquid staking issued on August 5. According to staff from the Division of Corporation Finance, liquid staking does not constitute the offer or sale of securities if the activities are primarily ministerial” and rewards are passed one-for-one from the protocol.

Overall, institutional demand for ETH, combined with regulatory clarity on liquid staking, continues to influence market behavior and contributes to selective altcoin performance.