Altcoins Surge Toward Altseason as Bitcoin's Dominance Wanes, but Risks Mount

Markets have shown mixed signals as investors weigh the potential for a new "Altseason" in the cryptocurrency space. The Altcoin Season Index, a key metric tracking the performance of the top 100 altcoins relative to Bitcoin over 90 days, currently stands at 77, its highest level since December 2025. This suggests growing momentum for altcoins, though analysts caution that a full-fledged Altseason—defined by 75% of the top 100 altcoins outperforming Bitcoin—has not yet materialized. Bitcoin dominance, a measure of Bitcoin's share of the total crypto market cap, has fallen to 57%, its lowest level in months, creating tailwinds for altcoin gains.

The market is closely watching MYX Finance (MYX), a decentralized derivatives exchange, which surged 1,400% in a week following a high-profile listing of the WLFI token, backed by Donald Trump's family. MYX's price action has been driven by a combination of aggressive short squeezes, large institutional accumulation, and strategic token unlocks. However, on-chain analysts have raised red flags, citing unusual trading volumes and potential manipulation through coordinated short liquidations. Over $89.5 million in short positions were liquidated between September 6 and 10, fueling further price gains. Despite these concerns, MYX's open interest reached $400 million, signaling strong speculative interest.

Other altcoins are also showing signs of strength. Dogecoin (DOGE) rose over 5% to $0.25, while Avalanche (AVAX) hit $29, its highest since January. Hyperliquid (HYPE), Stellar (XLM), and Litecoin (LTC) all gained more than 3% in a single day. These gains are being attributed to macroeconomic factors, including anticipated Federal Reserve rate cuts and broader risk-on sentiment. Analysts like Virtual Bacon note that Q4 could see a liquidity-driven rally, with Bitcoin and large-cap altcoins leading the charge before broader rotation into smaller altcoins.

Institutional dynamics are also shaping the landscape. The U.S. Securities and Exchange Commission (SEC) has streamlined approval processes for crypto ETFs, with 21 existing Bitcoin and Ethereum ETFs and more in the pipeline. However, recent outflows from Bitcoin and Ethereum ETFs totaled $244 million in a single week, reflecting caution among institutional investors. Meanwhile, Australia is tightening regulations on crypto exchanges, introducing new licensing requirements for digital asset platforms. These developments highlight the growing institutional interest in crypto but also underscore the regulatory uncertainties that could impact market sentiment.

Technical indicators paint a mixed picture. While the Altcoin Season Index suggests improving conditions, Bitcoin's price remains vulnerable to corrections. Bitcoin recently tested key support levels around $105,000–$100,000, with analysts warning of a potential retest if the $115,440 level breaks. For altcoins, the Chaikin Money Flow (CMF) indicator for MYX has shown bearish divergence, signaling weakening buying pressure despite rising prices. This has led some analysts to predict a potential correction to $9.55 for MYX if fresh inflows fail to materialize.

The coming months will be critical in determining whether Altseason gains traction. With Bitcoin's Q4 historically averaging 85% gains and the Altcoin Season Index at its strongest in nine months, investors are balancing optimism with caution. Institutional adoption, macroeconomic tailwinds, and regulatory clarity could all play pivotal roles in shaping the next phase of the market. However, as past cycles show, rapid gains in altcoins often precede sharp corrections, particularly when speculative fervor outpaces fundamental demand.