đ Altcoins Rocket While Bitcoin Pauses â Is Crypto Market Euphoria Getting Dangerous?
Altcoins are stealing the spotlight as Bitcoin takes a breatherâbut traders should watch for bubbles forming in the frenzy.
The Altseason Surge: Ethereum, Solana, and other major altcoins are posting double-digit gains while BTC consolidates near all-time highs. Retail FOMO is back, and leverage is creeping into derivatives markets.
Warning Signs Flash: Exchange inflows spiked this week as traders chase quick profits. 'Smart money' wallets, however, are quietly taking profitsâa classic divergence.
The Institutional Angle: Wall Street's latest crypto ETF filings include altcoin exposure, fueling speculation that the 2024-25 cycle wonât be Bitcoin-only. (Cue eye-roll at hedge funds 'discovering' diversification.)
This isnât 2021âs meme-driven madnessâyet. But when your Uber driver starts shilling Layer 2 tokens, it might be time to check your risk appetite.
Traders Bet Big on Altcoins
Bitcoin rallied from $105.4K to a new ATH of $122.7K this month, which pushed its realized cap above $1 trillion for the first time. However, Bitcoinâs near-term momentum has since cooled, and its price has coiled just below ATH levels. Alts, on the other hand, have begun to outperform in a classic capital rotation along the risk curve.
Glassnode reported that altseason conditions first emerged on July 7 and have remained intact. ethereum is leading the charge, and the altcoin market cap has increased by $216 billion over the past two weeks. This figure is one of the largest USD-denominated surges on record.
The broad-based rally appears to be occurring largely unanchored from asset-specific fundamentals, with nearly all altcoin sectors now moving in close lockstep. Correlations with Bitcoin have decreased significantly, which confirms a growing divergence in price behavior between Bitcoin and the broader alts ecosystem.
However, this growing Optimism and aggressive positioning have translated into a sharp rise in futures leverage across top altcoins. Glassnode found that the combined open interest for Ethereum, Solana, XRP, and Dogecoin soared from $26 billion to $44 billion in July alone.
This increase in Leveraged positions, which is consistently above the +2 standard deviation threshold for 12 consecutive days, is the longest stretch on record. It indicates a potential speculative froth building across the altcoin sector, which could leave markets more susceptible to sharp volatility.
Elevated leverage amplifies both upside and downside moves, and makes the environment âreflexive and fragile.â
Glassnode also noted that the cumulative monthly funding premium paid by long-side futures across top altcoins has climbed to $32.9 million per month. This is nearing levels last seen during Bitcoinâs March 2024 peak, though it remains below the peak euphoria witnessed during the initial $100K breakout in late 2024. The elevated cost of leverage indicates that traders are aggressively seeking long exposure.
Capital Flows to Ethereum
Ethereumâs open interest dominance has now risen to 38%, while Bitcoinâs stands at 62%. Such a difference reflects a notable rotation of capital and speculative activity toward Ethereum at the margins.
In fact, Ethereumâs open interest dominance has reached its highest level since April 2023, with only 5% of trading days recording a higher value. Meanwhile, Ethereum perpetual volume dominance has overtaken Bitcoinâs for the first time since the 2022 cycle low, the largest volume skew in ETHâs favor on record.
This significant rotation towards altcoins, while indicative of renewed optimism and capital inflows into the broader crypto market, also raises caution. If Bitcoinâs consolidation continues or weakness emerges, it could pose headwinds to altcoin momentum. This, in turn, could risk a swift unwinding of leverage-heavy positions.
As such, while altcoins are currently displaying broad strength, the rapid acceleration in open interest and leverage-fueled positioning points to a âfrothyâ backdrop that could increase volatility.
