Altcoins are showing renewed strength as stablecoin dominance weakens, signaling that traders may be rotating capital from cash positions into riskier assets. The total altcoin market capitalization has surged to a record $1.18 trillion, according to data from TradingView, hinting that an altseason could be forming after months of consolidation.
The TOTAL3 index — which tracks the market value of all cryptocurrencies excluding Bitcoin (BTC) and Ethereum (ETH) — reached an all-time high on Monday, marking its strongest weekly close ever. This milestone surpassed the previous 2021 peak, suggesting that investor confidence in alternative digital assets is rapidly improving.
USDT Dominance Declines as Capital Rotates Into Altcoins
The shift in sentiment is also reflected in Tether’s (USDT) dominance, which has dropped sharply over the past week. The metric fell by 11.8%, sliding to 4.18% from 4.74%, signaling that traders are converting stablecoins back into cryptocurrencies.
Historically, falling USDT dominance has coincided with periods of strong altcoin performance, as investors move away from safe-haven assets toward higher-risk, higher-reward opportunities. Analysts say a further drop below 4% would mark the lowest USDT dominance since January 2025, reinforcing bullish momentum in the broader crypto market.
Crypto trader Honey described the breakout as a technical confirmation of strength, pointing to a cup-and-handle pattern on the TOTAL3 chart. “We have officially broken out, which is extremely bullish for our beloved altcoins,” Honey said on X, forecasting that TOTAL3 could climb to $1.6 trillion in the coming weeks.
Data Suggests a Gradual Altseason Formation
Market analysts remain cautious but optimistic. Data from Cointelegraph and Cryptobubbles shows that the top 100 crypto assets excluding Bitcoin have outperformed BTC by over sixfold in cumulative returns during the past three months.
This rotation reflects a growing appetite for risk, a hallmark of early-stage altseasons. However, analysts note that a full-fledged altseason — where most capital inflows target non-Bitcoin assets — typically requires 80% to 90% of gains coming from altcoins.
Currently, about 60% of market gains are being driven by altcoins, suggesting that while the trend is gaining strength, it has not yet reached peak conditions.
Adding to this narrative, the Altcoin Season Index — a metric tracking altcoin dominance — has risen to 69%, approaching the key 75% level that usually confirms an established altseason.
Stablecoin Outflows Signal Caution Amid the Rally
Despite the bullish trend, some on-chain indicators are flashing caution. Data from CryptoQuant shows that since September 22, major exchanges have seen a $4 billion net outflow in ERC-20 stablecoins.
Binance accounted for roughly $3 billion, or 75%, of those withdrawals, with the platform’s stablecoin reserves dropping from $45 billion to $42 billion. Such outflows often follow strong price surges, indicating that some investors are locking in profits and moving funds off exchanges.
Lower stablecoin reserves also mean less “dry powder” available for fresh buying pressure, potentially increasing short-term volatility.
What’s Next for Altcoins
Analysts believe that the coming weeks will be critical in determining whether the current momentum solidifies into a sustained altseason. If Bitcoin continues to stabilize above $120,000 and liquidity conditions remain favorable, traders expect more capital to flow into top-performing altcoins such as Solana (SOL), Cardano (ADA), and Avalanche (AVAX).
However, if stablecoin outflows persist or Bitcoin dominance rises again, the market could face temporary cooling before another leg up.
For now, the combination of record-high altcoin valuations, declining USDT dominance, and improving sentiment paints a cautiously optimistic picture for the remainder of 2025.
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