Glassnode: The market share of Ethereum Perptual Futures continues to rise, and a "speculative bubble" is forming. Has the "alt season" already arrived?

Written by: Glassnode

Compiled by: Glendon, Techub News

Key points

The realized market value of Bitcoin has surpassed the $1 trillion mark for the first time. This is a truly milestone figure for Bitcoin, highlighting its strong liquidity characteristics and its increasingly significant influence on a macro level.

In the past week, all altcoin sectors have outperformed Bitcoin, with Ethereum's performance being particularly outstanding. This has led to a growth of 216 billion dollars in the market capitalization of altcoins over the past two weeks.

In July, the open interest of mainstream altcoins surged from $26 billion to $44 billion. The rise in leverage often amplifies the bidirectional volatility of the market, potentially leading to a more reflexive and fragile market environment.

Ethereum has decisively broken through several key on-chain resistance levels, including the Active Investor Price and the True Market Mean. However, it is expected to face significant selling pressure in the $4500 range.

The era of trillion dollars has arrived.

July was an explosive month for Bitcoin, with the price soaring from a weekly low of $105,400 to a historic high of $122,700, significantly increasing volatility. However, as the weekend approached, short-term momentum weakened, and since then, the Bitcoin price has remained below its historical high, showing a consolidating trend.

The significant rise in Bitcoin prices has prompted existing holders to take substantial profits, while simultaneously attracting new buyers to enter the market. This flow of funds can be quantified through the "Realized Cap" metric, which measures the scale of accumulated dollar liquidity in the asset.

Recent capital inflows have driven Bitcoin's market capitalization to exceed the $1 trillion mark for the first time. This is a truly milestone data point for Bitcoin. The larger Bitcoin's scale, the greater the volume of capital it stores, and the scale of funds settled through transactions will also expand correspondingly.

Speculation on altcoins is heating up

As the market capitalization of Bitcoin continues to grow, this article will focus on how the broader digital asset ecosystem responds to this performance. To assess this, the article uses the Altseason indicator, which will display positive signals when the following conditions are met:

Bitcoin and Ethereum are continually absorbing on-chain capital inflows;

The supply of stablecoins is increasing, indicating that the "dry powder" reserves off-market have increased; (Note, "dry powder" in the financial field refers to the unused cash reserves held by investment institutions or funds, that is, the "ammunition" of the capital market.)

The market value of altcoins shows an upward trend through the crossover of fast/slow moving averages.

The framework aims to capture the dynamics of capital rotation on the risk curve. When Bitcoin and Ethereum attract capital inflows while stablecoin liquidity increases, the conditions for capital to rotate towards high-risk altcoins will become more mature. If this environment shows a momentum crossover with the total market capitalization of altcoins, it indicates that funds are actively flowing into the altcoin space, driving its valuation expansion.

According to this indicator, the "Altcoin Season" conditions first appeared on July 9 and have continued to this day, indicating that a redistribution of capital is ongoing in the entire cryptocurrency sector.

The above conclusion can be verified by analyzing the performance of various sectors of the digital asset ecosystem over the past week. The recent consolidation of Bitcoin is evident, with price fluctuations remaining flat over the past week; in contrast, all other digital asset sectors have outperformed Bitcoin, with Ethereum leading the way once again. This phenomenon is a typical case of capital rotation along the risk curve.

However, given that Bitcoin holds a dominant position in the ecosystem (with a market share exceeding 64%), any sustained weakness it exhibits may pose a resistance to the altcoin market, thus suppressing the overall upward momentum of altcoins in this round.

From the perspective of sector correlation, this trend is further strengthened. Almost all altcoin sectors are currently showing highly synchronized volatility, reflecting the overall indiscriminate rise of the market, and is largely unaffected by the fundamentals of any specific asset.

At the same time, the correlation between altcoins and Bitcoin has significantly decreased, highlighting the increasing divergence in their price behavior and confirming the recent orthogonal relationship in price trends between Bitcoin and the broader altcoin ecosystem.

Recently, the total market capitalization of altcoins has seen a significant increase, with a growth of 216 billion dollars over the past two weeks. This is one of the largest single increases in the total market capitalization of altcoins measured in dollars, further confirming that funds are flowing in large scale into the altcoin sector.

Explosive growth of the derivatives market

Based on the significant growth observed in the altcoin market, it is necessary to analyze the altcoin derivatives market next to further assess the current risk appetite of market participants.

Since early July, the total open contracts for major altcoins (Ethereum, SOL, XRP, DOGE) have surged significantly from $26 billion to an astonishing $44 billion. The substantial increase in leverage in the futures market reflects a clear acceleration in speculative activity, indicating that traders are continuously increasing the frequency of opening leveraged positions.

From a negative perspective, this situation indicates that the market is beginning to form a certain degree of bubble, which may make it more susceptible to severe fluctuations. It should be noted that high leverage often amplifies the bidirectional volatility of the market's upward and downward movements, potentially leading to a more reflexive and fragile market environment.

When assessing the growth rate of total open interest, Glassnode found that the average daily increase over the last 12 trading days has consistently remained above the +2 standard deviation threshold, marking the longest duration on record.

This not only emphasizes the significant scale of the recent expansion in open contracts but also highlights its persistence, which may indicate a major shift in the speculative behavior of market participants.

The cumulative monthly funding rate paid by long futures contracts over the past 30 days can serve as a practical indicator of speculative demand. By observing the total monthly funding rates of mainstream altcoin assets, it can be found that the total leverage cost has reached approximately $32.9 million per month.

This figure can be compared to the approximately $42 million/month observed when Bitcoin reached its all-time high in March 2024, but it is still lower than the peak frenzy level of approximately $70 million/month that occurred when Bitcoin first broke $100,000 at the end of 2024.

The increase in the cost of financing indicates a significant rise in demand for leveraged long positions, highlighting that market participants are becoming increasingly optimistic and aggressive in their positions.

When assessing the dominance of open interest, it is evident that the expansion rate of Ethereum leveraged positions is much faster than that of Bitcoin.

Bitcoin open interest ratio: 62%

Ethereum open interest ratio: 38%

The proportion of Ethereum open contracts is currently on the rise, indicating a notable shift in market focus, with capital and speculative activities increasingly leaning towards Ethereum rather than Bitcoin.

To illustrate the significance of this trend, the percentage of Ethereum's open interest has now reached its highest level since April 2023, with only 5% of trading days recording a higher value. This marks a noteworthy event and signals an increase in speculative participation.

When assessing the trading volume advantage between Bitcoin and Ethereum, this trend becomes more apparent. Interestingly, the trading volume advantage of Ethereum perpetual contracts has surpassed Bitcoin for the first time since the cycle low in 2022, setting a record for Ethereum's largest trading volume advantage.

The significant rotation data in trading volume further confirms the scale of capital inflow into the altcoin sector, which has struggled to attract sufficient speculative interest for months prior.

Ethereum Market Analysis

As the price of Ethereum skyrockets and leads a broader rally in altcoins, we can focus on on-chain data from Ethereum to outline key pricing levels.

By analyzing the cost basis distribution of Ethereum, Glassnode noticed that investors' cost basis levels are highly concentrated in the range of $2400 to $2800. The price has clearly broken through this dense supply cluster and is currently trading within a price range with relatively low Ethereum holdings.

It should be noted that investors who previously purchased Ethereum in the range of $2400 to $2800 have now begun to sell their holdings, while the $3800 area is becoming a position for many investors to take profits.

Comparative analysis reveals that there are some commonalities between various on-chain valuation models of Ethereum and transaction volume distribution data. Specifically, the True Market Mean and Active Realized Price provide two adjusted cost basis models, which exclude long-term dormant and lost tokens. These adjustments offer a clear comparison between the average holding price cost of actively engaged investors and the realized price (i.e., the average cost basis per unit of ETH).

Real market average: 2500 USD

Active realized price: 3000 USD

Realized Price: 2100 USD

It is worth noting that these valuation anchor points align with the dense token distribution ranges shown in the aforementioned CBD indicators. This consistency supports the following observation: Ethereum has now broken through an important psychological price range. If the price of Ethereum retraces to this range, it is likely to become a significant support level.

To measure the upward target of ETH's recent rally, we can refer to the +1 standard deviation range of the active realized price of Ethereum. This range serves as a threshold where selling pressure may begin to intensify. Currently, the +1σ level is at $4500, and given the current market conditions, this area may be considered an overheated zone.

In the current cycle, this price range has already constituted a resistance level as early as March 2024 and during the previous cycles of 2020 to 2021. Breaking through this threshold is often accompanied by a surge in market euphoria and the emergence of unsustainable market structures.

Therefore, $4500 can be seen as a key level to watch on the upside for Ethereum, especially if the upward trend of Ethereum continues and the speculative bubble further intensifies.

Summary

Due to the generally poor performance of the altcoin sector throughout the cycle, the recent surge in performance marks a significant shift in investor behavior. This is particularly evident in the perpetual contract space, where Ethereum's perpetual contract market share is continuously rising and has surpassed Bitcoin for the first time since the cycle low in 2022.

The surge in market attention has spread to the derivatives market, with the total open interest of major altcoins (ETH, SOL, XRP, DOGE) rising from $26 billion to $44 billion just in July. This rapid growth indicates that speculative positions are being established at an accelerating pace, while market bubbles are also deepening. High leverage can amplify both gains and losses, leading to stronger reflexivity, making the market more susceptible to volatility shocks.