Ethereum’s Success Won’t Translate Into Altcoins

Summary Ether’s recent price gains have market pundits predicting an impending Altcoin Season. Altcoin’s are “oscillators at best” and two ingredients for their success are missing. Cryptocurrency deregulation will benefit Ethereum more than Bitcoin. The Dencun and Pectra upgrades sharply lowered fees going to the L1 and increased ETH’s inflation. Ethereum is an institutional-gradeblockchain with several unique bullish factors. Thesis: Investor sentiment for Ethereum ( ETH-USD ) shifted dramatically from depressed and apathetic to enthusiastic. The recent drop in Bitcoin Dominance alongside strong positive momentum for Ethereum has translated to predictions of an Altcoin Season. This makes complete sense given that ETH is the Altcoin market’s 600lb gorilla. And as the saying goes, “so goes ETH, so goes the Altcoin market.” However, this time is different, as we’re missing two pieces of the puzzle. This article discusses my Rating Scorecard, trends within Ethereum, why ETH could perform well without an Altcoin Season and how we can get to the “banana zone” in crypto. Introduction Ethereum ( ETH-USD ) is a distributed blockchain platform for smart contracts and decentralized applications. Ethereum’s smart contracts have enabled the creation of various new assets and industries such as Decentralized Finance ( DEFI ), NFTs and DAOs (for governance)…Ethereum uses a Proof of Stake (PoS) consensus mechanism where validators secure the network and participate in block production. Ratings Framework Ethereum is rated highly under my Ratings Scorecard which includes 12 factors. In summary, the project rates below-average under Vitalik Buterin’s Blockchain Trilemma (e.g., Decentralization, Scaleability, Security) as well as User Experience. Vitalik has chosen to focus on Security rather than Scaleability and Decentralization. That being said, management and the Ethereum Foundation are working on alleviating its shortcomings. Ethereum’s roadmap can be found here . Ethereum rates well for Ecosystem Development, Funding, Developers, (new) Management team, Roadmap, Use-Case, Tokenomics and Social Engagement. Ethereum also benefits from Lindy’s Law as it’s been around for a decade and has been copied, forked and battle-tested. Ethereum’s been said to work in an “Ivory Tower” away from the real world as Vitalik philosophizes about blockchain. Developers of Dapps have complained that Ethereum doesn’t reach out to them or “return phone calls” all of which sapped the excitement out of the chain in favor of sexier projects such as Solana ( SOL-USD ). Again, Ethereum’s steady, slow and corporate while Solana is entrepreneurial. Prophetizing Ethereum ETH’s having its most dramatic shift in history as skeptics jump onto the bull bandwagon. Despite being a long-term ETH bull, I have been fairly critical of them on social media (see below). I think their largest mistake was not shifting the narrative to “ETH as store of value” as they executed the “Dencun” and “Pectra” upgrades – both of which significantly reduced the amount of fee-revenues going to the L1. This effectively lowers intrinsic value using the DCF valuation method, making Ethereum appear overvalued relative to its current market cap. Author’s creation, LinkedIn The chart below shows how Ethereum’s inflation rate initially declined post-Merge” (move to proof-of-stake) but inevitably rose to 0.8%/year due to its upgrades. Ultrasound Money The Ethereum Foundation’s change in focus has given investors hope. This is best evangelized by Etherealize – their bull case is summarized in the table below. (Note: just to be clear, I don’t “buy” all of their bullish factors – several of which repeat themselves. On the rightmost column, I marked the ones that are uniquely bullish factors to Ethereum as “Yes”, as the others are common in other layer 1 chains.) Author’s creation, Etherealize data The Comeback Kid This term refers to someone who bounces back from hardship to achieve success again. The term often highlights resilience and the ability to persevere through challenging circumstances. Ok, maybe I’m stretching this a little bit, but in some ways Ethereum is the comeback kid. Yes, it didn’t go through a near-death experience like Solana, but Ethereum had a turnaround nonetheless. Recent changes in leadership at the Ethereum Foundation and a strategic focus on the layer 1’s scalability and U/X should result in a new lease on life. If you recall, Ethereum gave up on internal sharding and instead moved to dozens of L2s – all of which have different U/X’s. The Pectra upgrade resolves this issue via Account Abstraction ( EIP-7702) that: Improves U/X and user-experience Simplifies the development of Dapps And enhances security by providing multi-factor and other recovery options Recently Coinbase’s ( COIN ) Base-chain introduced a rebranded Base App that is a super-App platform (apps, one-tap payments, trading, social-media…) that “abstracts-away” all the friction points that have been hindering non-tech users from joining Web3. Ether as Digital Oil I would like to expand on factors from the above table that are mostly unique to Ethereum. Qualitatively, I believe Ethereum will be successful as cryptocurrency deregulation pivots the market to professional money managers and institutions such as banks. There are three bills which favor Ethereum: the Genius Bill (signed by Trump) for stablecoins, the Anti-CBDC Act and the CLARITY ACT. I expect the latter two will be signed into law by year-end. Institutions favor Ethereum for many reasons, some of which mirror themselves, meaning they’re comfortable working with technologies that are well-established and battle-tested. Asset managers also like the fact that Ethereum pays “dividends” in the form of staking returns (~ 3% yield ). Since Ether is a store of value and battle-tested, institutions prefer tokenizing assets on its platform without worrying if it’ll be around years from now or whether it’ll have high inflation. One concrete example showing that institutions are indeed interested in Ethereum is the volume of ETH CFDs. These are institutional derivative contracts for the difference between the opening and closing price of ETH. ETH’s market share of volume surged from 6.6% in FY’24 to 13.6% as of 1H’25. Wintermute About 55% of all tokenized assets (includes Stablecoins) are on Ethereum and this will rise quickly now that Genius has been signed into law. Further, if you include the Ethereum ecosystem (L2s, rollups) that percentage rises to over 75% (league table below). RWA.xyz ETH as a Strategic Reserve Asset Now that I’ve presented all the attributes that make Ethereum (the blockchain network) and ETH the native currency so revered to institutions, it makes sense that they would want to stockpile it into a treasury reserve as has been done with Bitcoin. Sharplink’s ( SBET ) Joe Lubin is to ETH in what MicroStrategy’s ( MSTR ) Michael Saylor is to BTC. You can think of ETH treasuries as Bitcoin with extra bells & whistles as the treasuries will be gathering Defi returns. The table below shows the largest treasuries and The Ether Machine recently joined with a stated goal of having $1.5Bn in ETH. Strategic.ETH.Reserve.xyz Some asset managers (especially smaller managers) have chosen to participate in ETH “ownership” by purchasing spot ETFs that custody Ether. The recent trend in ETF flows towards Ethereum rather than Bitcoin is the largest I’ve seen since ETH ETFs were first approved last year. In the table below, notice the percentage of Ethereum flows has sharply increased this year. For example, they rose from 38% of Bitcoin’s flow YTD to 89% MTD. CoinShares Is ETH’s 60% bull run a harbinger of Altcoin Season ? I believe the recent runup in ETH’s price is Ethereum normalizing back to its place as digital Silver as Bitcoin is to Gold. In my previous articles over the last year, I stated that we probably won’t have Altcoin Season until at least May’25 and by “By George” that’s exactly when ETH started mooning. However, the reasons why I said “wait till May” was that I assumed that a) the U.S. and or global economies would slow and b) that the Fed would begin Quantitative Easing and this will show itself by accelerating M2 growth (chart below). Neither has happened, albeit M2 growth has risen from 6% during my last article to 8% (tipping point ?). The U.S. Unemployment Rate remains at a low 4.1% (June 2025) despite “soft data” remaining lackluster. Consequently, I think Altcoins are Oscillators at best, but more likely they’re Call Options that steadily decline towards zero. Remember, low entry-barriers have allowed for the number of created cryptocurrencies to rise from 20,000 (previous Altcoin Season) to a whopping 18.88 million. That’s a lot of supply ! CoinMarketCap BGeometrics Speculation is getting Rampant My proprietary Indicators of Risk within financial markets show we’re near a local top and near peak speculation (though not as high as 2021). I am seeing confluence with other markets including crypto. As you can see in the charts below, crypto is also near peak speculation. The charts show just how excessive this speculation is. The first chart shows that Perpetual Futures Premiums on Altcoins are quite high (meaning there’s high demand for leveraged long exposure ) and tend to peak near local tops. The second chart shows that Whales holding Bitcoin are transferring coins to exchanges, which is typically done when they’re preparing to sell them. (Remember: Altcoins are tied to the hip of Bitcoin.) GlassNode GlassNode So then why am so Bullish on ETH ? I think ETH and especially Altcoins, could have a correction during the near-term as we wait for the Fed to add liquidity. However, I remain bullish (Rated “ Strong Buy ”) for my 10 year time horizon. There’s considerable resistance at the $4000-plus level on the chart, and according to Glassnode, it’ll be excessively difficult getting past $4,500, as this level represents one standard deviation of Ethereum’s active realized price. I leave you with a quote from Kevin Li (@ Artemis): “ETH isn’t just like a Cloud software company or a simple Utility token for transaction fees. Rather, it represents a scarce, programmable, and economically essential reserve asset—one that underpins the security, settlement, and functionality of a progressively institutionalized on-chain financial ecosystem.” GlassNode

Source: Seeking Alpha