The crypto market is witnessing early signs of a brewing altcoin season. Ether (ETH) has been outperforming bitcoin (BTC), a sign that investors are beginning to rotate capital from the latter to the former.

According to a weekly CryptoQuant report, a continuation of the current market trend could lead to a full-blown altseason, where bitcoin stalls and altcoins take off, raking in massive gains for investors.

Investors Rotate capital to Altcoins

For most of this bull cycle, ETH has underperformed against BTC. However, the situation has reversed. The relative price of ETH to BTC has surged from 0.018 to 0.031, reaching its highest level since January 24.

The shift in ETH performance started after the ETH/BTC Market Value to Realized Value (MVRV) ratio fell into the extremely undervalued territory in April. This ratio has acted as resistance since early 2023. ETH has now recovered and outperformed BTC by 72%. CryptoQuant analysts suggest that the ratio could rise further if it surpasses its 365-day moving average, with ETH potentially outperforming BTC even more.

With ETH receiving more capital now, the assets spot trading volume is exceeding that of bitcoins. For the first time in more than a year, the weekly spot trading volume for ETH surpassed that of bitcoin. ETH recorded $25.7 billion last week, while BTC saw $24.4 billion within the same period.

Analysts revealed that this is the first time since June 2024 that ethers weekly spot trading volume has exceeded bitcoins. This means the ETH/BTC trading ratio is above 1. Overall altcoin trading volume has increased to the highest level since March. This metric totaled $67 billion on July 17, a figure the market has not seen since March 2. The growth indicates a renewed interest in altcoins among investors.

ETH Sees Less Selling Pressure Than BTC

Furthermore, crypto investors are injecting more capital into U.S. spot Ethereum exchange-traded funds (ETFs) compared to their Bitcoin counterparts. Ethereum ETF allocations are growing faster than Bitcoins, as seen in the ETH/BTC ETF Holding Ratio climbing from 0.05 to 0.12.

Meanwhile, the ETH/BTC exchange inflow ratio, which measures selling pressure for the two assets, declined in May to its lowest level since 2020. The drop signaled that ETH was facing much lower selling pressure than BTC. Although the ratio has increased since then, it is still far from extremely high levels, which is a bullish signal – ETH could continue to outperform BTC.