Coinbase Report: Decline in Bitcoin Dominance, Altcoin Season Expected to Fully Unfold in September

According to the latest monthly outlook report from Coinbase’s institutional division, the full onset of the altcoin season may be just a few weeks away. The company predicts that starting in September, other cryptocurrencies will replace Bitcoin (BTC) as the dominant force in the market.

The so-called “altcoin season” refers to a phase in the market where cryptocurrencies other than Bitcoin lead the surge (typically driven by Ethereum, SOL, and other large-cap coins), during which the percentage increase of altcoins significantly exceeds that of Bitcoin.

This report, authored by Coinbase’s Global Research Head David Duong and published on Thursday, indicates that the three main factors driving the market are: the decline in Bitcoin’s market share, improved liquidity, and investors’ increased willingness to shift towards high Beta assets. Duong views this as a cyclical transition, where as market confidence builds, capital flows down the risk curve.

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Decline in Bitcoin’s Market Share

Capital Rotation Situation

The market share of Bitcoin (i.e., the proportion of Bitcoin in the total cryptocurrency market capitalization) has shown signs of retreat after peaking in the middle of this year, declining from about 65% to the current level of approximately 59%. Coinbase believes this indicates an early stage of capital flowing towards altcoins.

Coinbase’s report states:

CMC Altcoin Season Index, Source: CoinMarketCap

Historically, when Bitcoin’s market share declines, capital tends to first flow into large-cap altcoins, then into mid and small-cap coins. They anticipate that this capital rotation effect will become more pronounced in September.

The trend in liquidity is also more favorable for altcoins. Coinbase points out that the bid-ask spreads on major exchanges are narrowing, and order depth is increasing, making it easier for traders to enter and exit altcoin positions without incurring excessive slippage. Improved liquidity generally attracts large investors who would otherwise avoid trading obscure tokens.

The third factor is market sentiment. Duong notes that when the macro environment stabilizes and volatility remains within controllable limits, investors are more likely to seek higher-risk crypto assets for greater returns. If Bitcoin’s price enters a consolidation phase rather than continuously reaching new highs, such an environment is more likely to facilitate ongoing capital inflows into the altcoin market.

Coinbase does not specifically predict which tokens will lead the surge, but they emphasize the patterns observed in past market cycles—blue-chip altcoins often outperform the market initially, followed by small-cap assets taking the baton to rise.

The report also cautions that while September may mark the beginning of the altcoin rally, the duration and magnitude of this trend will still depend on market conditions and macroeconomic circumstances.

Bitcoin (BTC) has risen 27.2% year-to-date, but this increase lags behind several major altcoins, such as Ethereum (ETH) which is up 37.9%, and Ripple (XRP) which is up 49%; while SOL has only risen 1.67%, ADA is up 8.96%, and Dogecoin (DOGE) has decreased by 27.5%. Coinbase believes that overall market conditions in the coming months may favor a broader shift of capital towards altcoins.

References

Related reports: “GT Radar Weekly Report 8/13: Operational Thinking Under Ethereum’s Continuous Highs | What Sectors to Focus on During Altcoin Season?”