Ethereum Leads Altcoin Breakout

Ayush Tripathi Research Analyst

Max Shannon Senior Research Associate

Overview

Chart of the Week
Performance
Sentiment
Fund Flows
On-Chain
Futures, Options & Perpetuals
Bottom Line
Appendix

Last week, Ethereum significantly outperformed as the ETH/BTC ratio surged +27%, catalysing a broad altcoin rotation and reaffirming ETH’s role as the primary beneficiary of regulatory clarity, institutional adoption, and stablecoin growth.
Our in-house Cryptoasset Sentiment Index continues to signal a bullish outlook, with 11 of 15 indicators above trend and altcoin outperformance rising to 80% of tracked assets—indicating increased risk appetite and weaker Bitcoin correlation.
Chart of the Week: ETH US Spot ETF inflows hit all-time highs last week, highlighting institutional conviction in Ethereum’s role as “digital oil” powering both tokenization and stablecoin infrastructure—where it currently supports over 50% of all circulating stablecoins.

Chart of the Week

Performance

Last week, Ethereum commanded market attention as the ETH/BTC ratio surged 27%, driving a 6% reversal in Bitcoin Dominance and confirming the long-anticipated rotation into alternative digital assets. This development validates our February analysis flagging the unreasonable valuation gap between ETH and BTC, which has now begun to close meaningfully.

Despite this performance, significant additional upside potential is expected. Ethereum's three-month annualized basis currently sits around 7%-a level that appears neither stretched nor particularly attractive. Open interest expanded by approximately $6 billion across the top five derivatives exchanges, with positioning maintaining a call-heavy bias. The 1-week Put-Call 25-delta skew reached historically bullish territory at -11%, though recent reversals suggest potential headwinds.

This ongoing reversion introduces downside risk considerations for ETH, particularly as short-dated calls appear increasingly expensive given 1-week implied volatility at 74%. CME Futures open interest and volumes have established new records at $6.62 billion and $23.1 billion in weekly cumulative volume, respectively, likely driven by basis trade strategies involving long spot positions and short futures.

The past week represented a watershed moment for US cryptocurrency legislation. The Genius Act passed the Senate 68-30 on Thursday and received Presidential signature on Friday, positioning the legislation to enhance US dollar global influence through cross-border penetration of internet-native, low-cost crypto infrastructure.

The expansion of fully-backed stablecoins tied to US Treasuries introduces a compelling secondary effect-potential downward pressure on interest rates as increased stablecoin minting drives additional Treasury purchases. This mechanism creates positive conditions for risk assets including BTC and broader crypto markets.

Concurrently, the Clarity Act passed the House with a 294-134 vote, establishing primary oversight of digital commodities under CFTC jurisdiction while maintaining securities-style offerings under SEC purview. These legislative achievements provide the regulatory clarity markets have sought, establishing foundations for renewed innovation and capital formation within US markets.

Ethereum's observed dominant position-capturing 50% of stablecoin market capitalization and 55% of total tokenized asset value-positioned the network as a primary beneficiary of this regulatory clarity. Market participants clearly recognized these implications, front-running the legislative votes as most gains materialized prior to formal passage.

Corporate adoption trends have accelerated, with Ether treasury companies gaining prominence and contributing to outperformance. The Ether Machine's combination with Dynamix Corp, a NASDAQ SPAC, launched with over 400,000 Ether valued at $1.45 billion at current prices-representing nearly half of the $3 billion held by publicly traded companies (886,060 Ether total).

ETP flows into Ethereum totalled $2.1 billion last week, reinforcing institutional capital's recognition of Ethereum's role as "Digital Oil" powering tokenization and stablecoin infrastructure. Our Chart-of-the-Week highlights ETH ETF US Spot inflows reaching all-time highs since inception.

The pronounced ETH/BTC increase (+27%) coupled with SOL/ETH decline (-4%) signals institutional expectations regarding which blockchain infrastructure will lead the next phase of traditional finance adoption. Ethereum's established track record of decentralization and security increasingly positions it as the foundation for traditional finance's transition to decentralized infrastructure.

Macroeconomic developments presented mixed signals, with Bitcoin remaining largely unchanged amid conflicting inflation data. While PPI inflation trends toward the Federal Reserve's 2.0% annualized target and headline core CPI registered below expectations, these positive indicators were offset by the largest core goods-ex auto print since June 2022, climbing 0.5%.

Federal Reserve expectations for tariff-related inflationary pressures in coming months have dampened BTC performance, as rate cut expectations exceeding 25 basis points have diminished for September and October timeframes.

The Federal Reserve's emphasis on 'hard data' rather than 'soft data' presents a potentially beneficial dynamic for BTC despite this backward-looking policy stance. This approach increases the probability of policy errors, advantaging Bitcoin's position as a global, neutral, sovereign, non-custodial store of value.

In general, among the top 10 crypto assets XRP, Dogecoin, and Ethereum were the relative outperformers.

Overall altcoin outperformance vis-à-vis bitcoin has accelerated last week, with 80% of our tracked altcoins managing to outperform bitcoin on a weekly basis. Ethereum also managed to outperform bitcoin significantly last week.

Sentiment

Our in-house “Cryptoasset Sentiment Index” continues to signal a bullish sentiment.

At the moment, 11 out of 15 indicators are above their short-term trend.

Our Crypto Dispersion Index and Altseason Index showed very positive movements.

The Crypto Fear & Greed Index continues to signal a “Greed” level of sentiment as of this morning.

Performance dispersion among cryptoassets has started to pick up last week, signalling that altcoins have started to be slightly less correlated with the performance of bitcoin.

Altcoin outperformance vis-à-vis Bitcoin has increased from last week, with around 80% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Ethereum also managed to outperform Bitcoin last week.

In general, increasing (decreasing) altcoin outperformance tends to be a sign of increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin outperformance signals an increasing risk appetite at the moment.

Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has slightly decreased, moving from 0.64 to 0.60.

Fund Flows

Weekly fund flows into global crypto ETPs continues to new ATHs following Ethereum hitting its largest weekly inflows since inception.

Global crypto ETPs saw around +4,237.2 mn USD in weekly net inflows across all types of cryptoassets, after +3,765.1 mn USD in net inflows the previous week.

Global Bitcoin ETPs have experienced net inflows totalling +2,169.5 mn USD last week, of which +2,385.8 mn USD in net inflows were related to US spot Bitcoin ETFs.

The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +18.0 mn USD last week.

In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced minor net outflows equivalent to -15.5 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) experienced minor net inflows of +0.4 mn USD.

The Grayscale Bitcoin Trust (GBTC) has posted net outflows of -122.5 mn USD. The iShares Bitcoin Trust (IBIT), experienced strong net inflows of around +2,569 mn USD last week.

Meanwhile, flows into global Ethereum ETPs also accelerated last week, reaching the highest level with around +2,182.6 mn USD in net inflows.

US spot Ethereum ETFs, also recorded net inflows of around +2,182.6 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), has posted net inflows of +14.1 mn USD.

The Bitwise Ethereum ETF (ETHW) in the US has posted also net inflows of +43.1 mn USD.

In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net inflows of +2.0 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw significant net inflows of +8.3 mn USD.

Altcoin ETPs ex Ethereum also experienced significant net inflows of +98.2 mn USD last week, underscoring the rising risk appetite for altcoins.

However, thematic & basket crypto ETPs continued to be out of favour, with net outflows of around -120.7 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) had sticky AuM (+/- 0 mn USD).

Global crypto hedge funds exposure to Bitcoin has decreased last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin decreased to around 0.64 per yesterday's close, down from 0.74 from the week before.

On-Chain Data

Last week, Bitcoin's on-chain activity improved slightly but still leave room for more upside.

Net buying volumes on bitcoin spot exchanges turned briefly positive last Monday, yet net buying volumes over the past 7 days continued to be negative highlighting ongoing selling pressure on bitcoin spot exchanges.

However, when tracking the 30-day measure of “apparent demand” for Bitcoin, we see that it remained positive and continued to reaccelerate over the past week. This is signalling a renewed influx of short-term holders (read “retail investors”) as well.

That being said, Bitcoin whale activity has shifted notably, with large holders now demonstrating net inflows to exchanges rather than accumulation. Specifically, whale addresses deposited a net +23,276 BTC to exchanges over the past week, signalling reduced institutional buying appetite among major holders. This marks the first significant whale-to-exchange flow since mid-April 2024, when similar distribution patterns were observed.

This exchange inflow pattern typically exerts bearish pressure on price action, as evidenced by Bitcoin's failure to sustain upward momentum. BTC has remained range-bound, potentially reflecting the market's response to this increased selling pressure from large-scale participants.

The absence of a sustained rally despite broader market conditions suggests that whale distribution could be outweighing retail and institutional demand, creating a technical headwind for near-term price performance. This divergence between whale behaviour and price action indicates that profit-taking by large holders may be offsetting underlying market demand

Furthermore, according to recent Glassnode data, the broader downward trajectory in exchange-held Bitcoin reserves continues. However, last week exhibited notable volatility in these holdings, with reserves spiking from the prior two-week level of 2.874 million BTC to a peak of 2.919 million BTC mid-week, before settling at 2.902 million BTC by week's end. This closing figure represents approximately 14.59% of Bitcoin's total circulating supply.

Futures, Options & Perpetuals

Last week, BTC futures open interest increased last week by +10.2k BTC across all exchanges, and increased by +1.4k BTC on CME. Meanwhile, perpetual open interest increased by around +10.1k BTC.

BTC perpetual funding rates continued to remain positive and upward trending last week indicating a bullish sentiment among traders in the perpetual futures market and a long bias.

In general, when the funding rate is positive (negative), long (short) positions periodically pay short (long) positions, which is indicative of bullish (bearish) sentiment.

The BTC 3-months annualised basis increased significantly last week to around 8.4% p.a., averaged across various futures exchanges.

BTC option open interest increased by around +23.1k BTC while the put-call open interest ratio increased slightly to 0.60. We observed some significant spikes in the put-call volume ratio indicating an increasing appetite for downside protection during this rally.

Meanwhile, the 1-month 25-delta skew for BTC decreased throughout the week from +1.9% to -5.2% signalling increasing appetite for call options. The presence of a negative skew indicates some preference for upside exposure.

BTC option implied volatilities decreased slightly compared to last week.

At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 37.4% p.a. on Deribit.

Bottom Line

Last week, Ethereum significantly outperformed as the ETH/BTC ratio surged +27%, catalysing a broad altcoin rotation and reaffirming ETH’s role as the primary beneficiary of regulatory clarity, institutional adoption, and stablecoin growth.
Our in-house Cryptoasset Sentiment Index continues to signal a bullish outlook, with 11 of 15 indicators above trend and altcoin outperformance rising to 80% of tracked assets—indicating increased risk appetite and weaker Bitcoin correlation.
Chart of the Week: ETH US Spot ETF inflows hit all-time highs last week, highlighting institutional conviction in Ethereum’s role as “digital oil” powering both tokenization and stablecoin infrastructure—where it currently supports over 50% of all circulating stablecoins.

Appendix

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