Altcoin cycle signal: Why Ethereum leads the craze

Source: Crypto Compound, compiled by Shaw bitchain vision

The cryptocurrency market is not running straight-line – it develops in a spiral form.Bitcoin lays the foundation, Ethereum acts as a “portal” and other altcoins follow closely.If you want to seize the next big market, it is crucial to understand this spiral development.And the core of all this lies in one indicator:ETH/BTC ratio.

Let’s analyze it.

Ethereum: The Door of Risk

Ethereum is where traders test their risk appetite.

Bitcoin is often regarded as a macro hedging tool.Institutions regard it as a digital gold, a means of storage of value, or a means of hedging the depreciation of fiat currency.But Ethereum plays a different role—it is the first step toward higher-risk cryptocurrency investment.

This shows that they are confident when institutions and experienced traders start configuring ETH.This shows that they are willing to take another step forward on the risk curve.

Historical experience shows that once ETH becomes a trading hotspot, liquidity will not stop there—liquidity will flow to other mainstream currencies, and then the wider altcoin market.

ETH/BTC: Market risk barometer

A ratio leads the overall situation.The ETH/BTC chart is the “main indicator” of the cryptocurrency risk cycle.When ETH performs better than Bitcoin, it is usually consistent with the cycle of altcoin.The logic is simple: the strength of ETH shows that the market demand for risky assets has surpassed Bitcoin.

• The bottom of ETH/BTC often marks the beginning of a new round of market conditions.

• The top of ETH/BTC usually coincides with the pinnacle of altcoin fanaticism.

It can be considered a risk barometer: when ETH remains firm and rises relative to BTC, it indicates that funds are willing to flow into riskier assets, which is a positive signal.

Liquidity always follows ETH

The impact of ETF capital flows is much greater than one might think.

When capital inflows occur on Ethereum ETFs, this liquidity is not just about Ethereum.It will spread to the spot market, derivatives market, and eventually to the altcoin trading pair.The increase in Ethereum transaction volume means:

• The transaction spread is smaller.

• ETH trading pairs have higher liquidity.

• Lower volatility reduces costs when switching to alternative investments.

Simply put: Ethereum’s strength makes it easier and cheaper to flow into altcoins.This is why institutional investment in Ethereum will indirectly drive the entire market.

Rotary roadmap: Bitcoin → Ethereum → Mainstream altcoins → Other altcoins

Every cycle has its own rules.

Cryptocurrency cycles do not change randomly.In the past cycle, there is a predictable repeat sequence:

1. Bitcoin leads the rise.As Bitcoin establishes its trend strength, market confidence has increased.

2. Ethereum follows.Institutions and traders increase their ETH, showing that they are willing to take more risks

3. Mainstream altcoins begin to rise.Currencies like SOL, BNB, AVAX and ADA are starting to outperform the market.

4. Medium-sized ecosystem altcoins rise.Narrative-driven currencies related to infrastructure and ecosystems are the focus.

5. Speculative low-market altcoins soar.Optimism at the end of the economic cycle prompted funds to pour into the highly speculative small-plate altcoin market.

Ethereum outperforms Bitcoin, which shows that we are transitioning from phase one to phase two – large altcoins are about to take off.

Narrative overflow: Ethereum drives its ecosystem

The strong development of Ethereum has driven everything related to it.

When Ethereum performs strongly, narratives related to its ecosystem can also heat up, including:

• DeFi protocol(Uniswap, Aave, Curve).

• Layer2 extension solution(Arbitrum, Optimism, zkSync).

• Pledge and liquid pledge tokens(Lido, Rocket Pool).

• NFT-related projects still run mainly on Ethereum.

Investors will naturally look for the “next opportunity”.Projects related to Ethereum are the first choice before funds are transferred to other chains.

Institutions purchase ETH through ETFs → Indirect benefits of altcoins

The ETF era has changed people’s psychology.

Institutional investors buying ETH through ETFs not only favors Ethereum, but also changes people’s perception of cryptocurrencies.If ETH is recognized by institutions as an asset, then the idea that cryptocurrency is not just Bitcoin will be normalized.

This psychological change prompts fund allocators to turn their attention to other currencies.Retail investors follow the same logic: “Since Ethereum (ETH) can be invested, what about SOL or AVAX?” As a result, funds flow to the wider altcoin market.

Beware of false signals

Not every Ethereum breakout means the arrival of the altcoin season.Ethereum can lead temporarily, but it does not necessarily trigger a full-scale rotation.For example, during a period of weak global liquidity, if ETH/BTC rises, the altcoin rally may fade quickly.

The difference between a false signal and a real signal is whether it can be confirmed:

• Ethereum’s dominance rises with the increase in ETF capital inflows.

• As spot demand for Ethereum increases, wider derivative trading volumes are also growing.

• Both large and medium altcoins have high participation.

Without this confirmation, Ethereum’s strength may be just an illusion.

Important technical level

The chart tells us the timing.

ETH/BTC has signaled reliable at key levels over the years.Historically:

• Breakthrough and Stand 0.04 above triggered a strong altcoin rebound.

• Trends that continue to be higher than this region usually mark the beginning of the altcoin season.

• Coupled with the confirmation of spot capital inflows on Ethereum and the rise in the number of open contracts in perpetual contracts in major currencies like SOL, BNB or AVAX, you have a “green light” signal.

Why this cycle may be stronger

The background this time is different.

Previous altcoin cycles were mainly driven by retail speculation and speculation.And this time there is a structural difference: institutional funds inflows.Spot Ethereum ETFs provide a regulated channel for billions of funds to flow into Ethereum.This liquidity then produces a chain reaction throughout the market.

Combined with the following:

• Layer-2 has matured capacity expansion.Practical application cases drive ETH demand.

• Pledge income.ETHIt is a productive asset, not just a speculative asset.

• Narrative overflows.From DeFi to cross-chain interoperability.

This round of market is not just a speculative rotation, but a market structure that is maturing, and Ethereum is in a leading position in both institutional and narrative levels.

What should traders pay attention to

A clear list helps filter out the noise.

To deal with this situation, please pay attention to three main signals:

1. ETH/BTC ratio.Continuously maintain above 0.04.

2. ETF Fund inflows.Demand for Ethereum spot ETFs is strong and stable.

3. Derivatives Confirmation.The holdings and trading volume of mainstream currencies such as SOL , BNB, AVAX have both increased.

When these factors are consistent, the probability of altcoins continuing to rise cycles increases significantly.

The story of the altcoin cycle always starts with Ethereum.Bitcoin sets the tone, but Ethereum shows when the market is ready to take risks.The ETH/BTC ratio is your compass – showing when money should be expected to turn to altcoins.

Liquidity follows ETH, and the narrative of its ecosystem continues to spread, and institutional investors’ confidence in ETH also brings a halo effect to the overall market.But don’t forget: not all signals are true.Please be sure to confirm before making a big bet.

Driven by Ethereum ETF, this cycle may be the strongest round to date.

If Ethereum leads, the rest will follow.