Altcoin Season Elusive as Ethereum Weakness Limits Broader Rally

Recent market action continues to support the altcoin rally thesis.

Zooming out, Bitcoin [BTC] is still outperforming most other large-cap assets, up over 6% in Q2 so far. In contrast, most top caps remain in the red for the quarter, which lines up with Bitcoin dominance staying steady around the 60% level, alongside a 1.85% gain over the same period.

That said, the OTHERS/BTC ratio doesn’t really show the same picture. As the chart below highlights, the ratio is up more than 6% in Q2 so far. Even more notably, it closed May with a strong 14.5% gain, hinting that some capital rotation beyond Bitcoin may already be underway.

Yet, that strength isn’t showing up in the Altcoin Season Index.

According to BlockchainCenter data, the index ended May down more than 10%, suggesting that the broader altcoin market is still struggling to gain traction against Bitcoin. In other words, while pockets of the market appear to be rotating into altcoins, participation remains narrow rather than broad-based.

That is also reflected in Bitcoin dominance, which continues to hover around the 60% level. In this context, the rising OTHERS/BTC ratio appears to be highlighting a more selective rotation into altcoins rather than the start of a full-fledged alt season.

Yet, that strength hasn’t filtered through to the Altcoin Season Index, raising the question: What exactly is this divergence signaling?

The market is increasingly eyeing June as a potential catalyst for a broader altcoin rally.

The reasoning is straightforward. As one prominent analyst noted, Hyperliquid [HYPE] continues to trend higher, yet that strength has not translated into a wider rotation across the altcoin market. Instead, capital remains concentrated in a handful of outperformers.

However, that could start to change in June. With regulatory clarity expected to improve, traders are betting on capital rotating further out the risk curve. Much of the focus remains on Ethereum [ETH], which is still trading nearly 60% below its previous cycle high.

Until ETH and its DeFi ecosystem attract stronger inflows, the broader altcoin rally may struggle to gain traction.

On-chain data reinforces that view.

According to DeFiLlama, Ethereum’s TVL has slipped back toward the $40 billion level, a zone last seen in Q1 2024. Meanwhile, stablecoin supply on the network remains roughly $6 billion below its peak of $166 billion. Together, these metrics suggest that capital has yet to return to Ethereum at the scale needed to support a broader rotation across the altcoin market.

That also helps explain why the Altcoin Season Index remains subdued.

While the OTHERS/BTC ratio continues to move higher, pointing to selective inflows into certain altcoins, the broader market is not seeing the same level of participation. Put simply, capital is rotating into a few outperformers rather than spreading across the altcoin sector, which helps explain the growing divergence between the two indicators.