Bitcoin (BTC USD) dominance declined aggressively in the first 3 weeks of July, raising optimism that altcoin season is beginning.
Some altcoins, including Ethereum, experienced significant liquidity injection during the same period.
Fast forward to the present, and Bitcoin’s dominance failed to drop below 60%. Instead, it bounced back from a February support level and surged back above 62% at the time of observation.
The dominance recovery was noteworthy because sub 60% levels have historically been seen as a sign that altcoin season was beginning. The recovery cast more doubt regarding the altcoin season popping off.
Analysts were also waiting to see if ETH price would push to new highs. A new ATH price for the king of the altcoins would have further solidified the prospects of altcoin season.
But does the Bitcoin (BTC USD) dominance recovery invalidate hopes of an altcoin season? First of all, both BTC and ETH prices were extremely overbought at the end of last week.
This may have contributed to the recent dip in ETH price action in the first half of the week and BTC bullish momentum flattening out.
More notably, the ETH price peaked at $3,860, which was about $1000 away from its historic high. Analysts were expecting a retest of its previous ATH as a confirmation that altcoin season was officially on.
The rally observed over the last few weeks triggered a lot of optimism, but there was also a faction of analysts expressing doubt regarding potential continuation.
For instance, many anticipated disruptions in August, which was just one week away at press time.
The fact that demand slowed down significantly this week was evidence that investors were moving cautiously. However, it was worth noting that whales and institutions played a key role in the recent rally.
A recent CryptoQuant analysis noted that the big players were behind the latest rally while retail activity remained relatively subdued.
Large investor holdings data revealed that whale activity in the last 4 weeks surged to levels last seen during the peak of the previous bull run.
Altcoin season prospects were now in limbo, judging by the latest market outcome. However, there were some interesting developments that could offer insights into the next market move.
For instance, Bitcoin ETF flows switched to negative since the start of this week. This signaled that institutions were taking profits, and it also came days after observations signaling intensifying sell pressure from whales.
Interestingly, ETH ETF flows remained positive, largely driven by demand from BlackRock. Roughly $1.16 billion was injected into ETH ETFs between Monday and Wednesday.
The sustained inflows into ETH ETFs may signal that institutions still feel that ETH is undervalued despite its recent upside. This could signal that the potential downside may be limited.
In other words, ETH could still potentially extend its upside in the coming weeks and possibly push into price discovery. However, this will depend on whether whale and institutional demand will remain strong.
CoinGlass large orderbook statistics revealed that there was about $18.29 million in net demand for ETH in the spot market within the last 3 days. This was across Coinbase, OKX and Binance, although the latter had over $10 million in outflows.
The data also revealed that there was over $6 billion worth of long positions across OKX and Binance spot segments. A clear sign that whales were still optimistic about ETH’s potential upside.
Nonetheless, ETH open interest hovered at impressive heights near its recent ATH above $57 billion. This meant the risk of heavy liquidations was still quite high.
Roughly $157 million worth of ETH longs were liquidated in the last 24 hours alone. These factors could continue influencing ETH short-term price action. Moreover, the king of the altcoins could possibly determine the fate of the altcoin season.
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