Introduction

Over the past two years, the crypto market has been reshaped profoundly—from the deep correction of 2022–2023, to increasingly clearer regulation in 2024, and into 2025 with accelerating inflows from institutions and compliant channels. Recently, early “Altseason” signals have appeared. Unlike past episodes of indiscriminate rallies, this cycle skews toward structured rotation: capital is being directed via compliant rails such as ETFs and DATs, while high-quality projects and narrative-driven sectors command greater premia.

This report, from a professional investment perspective, examines market signals, capital flows, core sectors, risks, and strategies, focusing on three questions: Has Altseason truly begun? Where is the money flowing? How should investors position?

CoinEx Research believes the 2025 Altseason is not a “blind, broad-based” speculative feast but a compliance-led, institution-driven, fundamentals-anchored structural bull market. Understanding this evolution helps capture short-term trading windows and informs long-term positioning. Using data and logic as the through line—combined with macro policy, on-chain indicators, and project fundamentals—this report provides a cross-cycle, actionable framework to capture genuine excess returns in a market marked by high volatility and dispersion.

Altseason 2025: Signals Verification and Market Characteristics

Recently we have observed three concurrent signals: a six-week decline in BTC.D, the Altseason Index approaching the key 75 threshold, and altcoin total market cap hitting a two-year high. This is the first time since 2021 that all three core indicators have flashed an “Altseason start” signal simultaneously. Unlike prior cycles, investors should shift from a “broad-based rally” mindset to a “structured selection” mindset.

Key Altseason Metrics: BTC.D, Altseason Index, and Total Market Cap

Bitcoin Dominance (BTC.D): The barometer of capital rotation

BTC.D reflects Bitcoin’s share of overall crypto market cap and is the primary gauge of rotation between BTC and altcoins. BTC.D’s cyclical swings are strongly negatively correlated with Altseasons; a persistent decline typically signals capital rotating from BTC into altcoins.

Historical threshold effects:

2017 Altseason: BTC.D fell from 86% to 33% (a >50-point drop). Market structure became highly fragmented; funds broadly flowed into altcoins, producing a “rising tide lifts all boats” effect.
2021: BTC.D declined from 69% to 40% (≈30 points).
2025 (to September): BTC.D eased from 64% to 57% (≈7 points). While less dramatic than prior cycles, this is the first noteworthy >7-point drop since 2022.

We judge that when BTC price is range-bound while BTC.D keeps falling (the “BTC sideways + dominance down” combo), it strongly signals the start of Altseason. This indicates funds are moving into altcoins without selling BTC—evidence of rising risk appetite. From August to September 2025, BTC hovered in the US$110–120K band while BTC.D fell by 7 points, consistent with classic Altseason technical patterns.

Altseason Index: The quantifier of market sentiment

The Altseason Index measures altcoin performance relative to BTC. Two mainstream versions exist—Blockchaincenter (Top 50) and CoinMarketCap (Top 100 ex-stablecoins). Though methodologies differ, both define “Altseason” as when 75% of non-BTC coins outperform BTC over 90 days.

Current readings: Blockchaincenter at 73, CoinMarketCap at 69—both near the key 75 threshold. The market may not yet be in a textbook Altseason, but the uptrend provides a clear initiation signal.

Total Market Cap: The yardstick of capital inflows

Changes in total crypto market cap and its segments offer funding validation and are an important supplementary gauge of market heat. From March to September 2025, total crypto market cap rose from US$2.5T to US$4T (+60%). Altcoin market cap (ex-BTC) exceeded US$1.88T in mid-August, approaching historical highs. Notably, instead of a straight-line surge, altcoin market cap has climbed in stepwise fashion—consistent with institutions entering in tranches. This structural rise, together with the decline in BTC.D, strengthens the probability that Altseason is underway.

Capital Flows and Market Structure: Institutional Entry vs Retail Sentiment

If an Altseason unfolds in 2025, its prevailing logic is likely selective appreciation rather than a broad-based melt-up. The shifts in capital flows and market structure are evident in three areas:

Historical cycle comparison: from wild growth to structural differentiation

2017: ICOs were the core driver. Regulatory gaps and the ERC-20 standard lowered issuance barriers, project counts exploded, and retail money spread widely.
2020–2021: DeFi and liquidity mining took the lead. Institutions began exploratory allocations, with a preference for protocols showing real product prototypes.
2025: The alt market has entered a compliance era:
Regulatory clarity. The U.S. SEC and EU MiCA have moved toward categorized oversight of utility tokens, creating a “compliance-or-perish” environment
Institutional leadership. Traditional financial institutions are entering through compliant channels such as ETFs and Digital Asset Treasuries (DATs), reshaping market capital structure.
Sharper quality dispersion. After two narrative-driven cycles, investor sophistication has risen; capital now favors projects with fundamentals and compliance readiness.

Active institutional entry

In 2025, institutional access routes are more diverse and compliant than in prior cycles, primarily via spot ETFs and DATs. Importantly, allocation is concentrated in assets with clear regulatory status and deep liquidity (e.g., BTC, ETH). Even within the more flexible DAT strategies, institutions tend to prefer mainstream assets (SOL, XRP, BNB, HYPE, ENA, etc.) to mitigate regulatory uncertainty. This preference has produced structural rotation within altcoins rather than a uniform “flood-the-zone” rally—reflecting a dual mandate to balance compliance safety with growth potential, and further amplifying performance dispersion across the altcoin complex.

Muted retail sentiment and a maturing market

In contrast to active institutional participation, retail sentiment appears relatively subdued in the early stages of the 2025 Altseason. Three factors dominate:

After the 2022–2023 bear market, retail risk appetite declined, with a tilt toward lower-risk BTC.
Stricter global compliance—KYC and identity verification—has pushed some retail participants to exit or wait on the sidelines.
With multiple cycles behind them, investors have become more discerning, preferring projects with fundamental support rather than blindly chasing highs.

Investment Strategy during Altseason: Compliance Thresholds and Fundamental Screening

In a highly fragmented market, blindly chasing hot trends invites greater volatility. Building portfolios around “compliance + fundamentals” offers a better chance of riding through cycles and capturing excess returns.

Compliance: the prerequisite for capital inflows

As regulatory frameworks become clearer across major jurisdictions (U.S., EU, Hong Kong), whether a project can meet these standards is critical. Institutional capital prefers projects that operate via compliant channels (such as ETFs or DATs) or in favorable jurisdictions—an implicit signal of rigorous regulatory review, greater security, and higher operational stability.

Fundamentals: the core competitiveness to survive cycles

Beyond narrative-driven hype, the market is returning to fundamentals. Capital increasingly favors projects with:

Real revenues (e.g., DeFi protocols);
Technological innovation (e.g., AI–blockchain convergence);
Clear application scenarios (e.g., RWA);
Sustainable tokenomics;
Active ecosystem development.

We believe this screening logic requires investors to shift from “story-driven” to “data-driven” analysis—digging into:

Team background and execution capacity (cross-cycle resilience);
Technical feasibility and ecosystem activity (on-chain data, address growth, TVL changes);
Revenue strength and token-economic model (protocol income, dividend mechanisms, governance token incentives).

Top Crypto Investment Opportunities: High-Quality Sectors

Current flows and sector performance show a new dominant theme: institutionalization, compliance, and fundamentals. ETFs/DAT provide steady capital inflows; DeFi blue chips and RWA offer medium- to long-term growth; AI and Meme narratives provide short-term high-beta speculation. Under this setup, strategy should shift from “chasing hot spots” to multi-layered portfolio construction—using core blue-chip assets as anchors, capturing growth from DeFi or RWA projects, and seeking short-term alpha from AI and Meme sectors, thereby achieving sustainable excess returns in a volatile environment.

Institutional Advantage Tracks: ETFs and DAT

Institutional capital is accelerating its entry into crypto through compliant channels. BTC and ETH remain core holdings, consistently favored by institutions. Allocation logic now emphasizes regulatory clarity, technical fundamentals, and long-term use cases—creating a significant “compliance premium” for altcoins with strong institutional backing, clear business models, and proactive regulatory engagement.

Beyond BTC and ETH, some altcoins with promising compliance prospects and innovative narratives are entering the institutional radar. Multiple spot ETF applications now cover XRP, SOL, ADA, LTC, DOGE, SUI, APT, among others.

In the DAT space, institutions prefer assets with solid fundamentals and clear compliance pathways. Reserve strategies have evolved from BTC-only to diversified crypto holdings; ETH, SOL, BNB, HYPE, ENA are becoming new treasury hotspots. But as the market matures and regulation tightens, the DAT model faces sustainability challenges—investors should closely watch related risks.

DeFi Blue Chips and Innovative Protocols: Revenue-Based and Growth Plays

Hyperliquid: Using USDH to anchor a new stablecoin narrative in decentralized perpetuals

Hyperliquid leads the decentralized perpetual contracts market with monthly trading volumes nearing US$400B, holding about 70% market share and generating ≈US$106M monthly revenue. Notably, this volume is steadily eating into centralized exchange dominance: its share of Binance’s monthly perps volume rose from ~8% at the start of the year to 13.6% recently. More importantly, Hyperliquid is launching its native stablecoin USDH to reduce dependence on USDC and channel hundreds of millions in annual interest back to its community. This strategic shift will define its future revenue ceiling and is a key axis of our long-term valuation. We view USDH not merely as a new stablecoin but as the strategic fulcrum for value capture across Hyperliquid’s ecosystem, making its success pivotal for governance and income distribution.

Ethena: Redefining synthetic dollars and the fee-switch model

Ethena’s synthetic dollar USDe doubled its supply to US$12B within a single month, with cumulative revenue exceeding US$500M and US$61M in August alone. Its “Fee Switch” mechanism is about to activate, channeling protocol profits directly to ENA token holders—Arthur Hayes projects US$500M in token buybacks. In parallel, Mega Matrix plans to raise US$2B to build an Ethena stablecoin governance treasury, directly buying ENA governance tokens. This marks a shift: traditional capital no longer merely holds crypto assets but also participates in protocol governance to secure long-term returns. We believe the Fee Switch will be a fundamental inflection point for ENA, while institutional involvement in governance signals the emergence of “protocol-as-investment” structures.

Pendle: The flywheel of a yield aggregator

Pendle’s TVL has surpassed US$12B, generating ≈US$75M in annualized revenue. Ethena’s sUSDe+USDe pools contribute 70%+ of liquidity. Acting as Ethena’s “cold-start engine,” Pendle drove issuance from US$500M to US$3.5B in just four months. Pendle is also expanding into derivatives with the Boros platform, enabling funding-rate trading and hedging. We see Pendle as an archetypal “flywheel effect” case—binding itself to Ethena while branching into new derivative markets, positioning itself as a continuously growing DeFi blue chip.

ONDO: The RWA giant’s on-chain expansion

ONDO, a leader in the real-world asset (RWA) segment, now boasts US$1.4B TVL. It recently launched Ondo Global Markets, offering non-U.S. investors access to over 100 tokenized U.S. equities and ETFs, backed by multiple mainstream exchanges, with daily volume >US$32M and market cap >

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