Ethereum's Bear Trap Risk Grows as Altcoin Market Remains Bullish
The altcoin market remains bullish, with the Altcoin Season Index recovering levels last seen in late Q2. The index has broken out sharply above 50, recording six consecutive weeks of higher highs, while Bitcoin struggles to break above $90k. This setup is keeping the broader altcoin rally narrative alive heading into Q4.
However, Ethereum's weak Spot demand and ETF outflows are challenging the broader altcoin rally. If ETH breaks lower, rising leverage could trigger a wider altcoin unwind. This would be a bear trap for Ethereum, potentially spooking late-leveraged longs and driving a downward spiral.
The stablecoin market cap is still down nearly from its May peak, and without fresh capital flowing into USDT, bids on ETH, SOL, XRP, and other altcoins cannot provide the liquidity needed to propel the rally higher. This suggests that institutional capital is flowing into BTC rather than ETH, which could hurt Ethereum's bullish scenario.
Ethereum faces a critical bear trap test, and its ability to break above the 0.03 resistance level on the ETH/BTC pair will be crucial in determining the next altcoin rotation. If Ethereum fails to break above this level, capital rotation into Ethereum may continue to be limited.