USDT liquidity flow to Ethereum could fuel altcoin season rally: CryptoQuant

Ethereum has overtaken Tron in USDT flows with analysts noting that this shift could drive an ETH-led altcoin rally as Bitcoin dominance weakens.

Summary

• $26.6B in USDT flows recorded on Ethereum.
• Bitcoin dominance falls to 57.4% as alts gain.
• Analysts expect ETH-led altcoin season as liquidity patterns shift.

Ethereum has overtaken Tron as the main hub for USDT transfers, with $26.6 billion recorded on-chain.

According to an Oct. 2 analysis by CryptoQuant contributor BorisD, the move suggests risk appetite in crypto markets is rotating toward Ethereum (ETH). This is often a precursor to wider altcoin rallies. Tron (TRX) activity has stayed flat, indicating its flows are mostly tied to exchange and user transfers rather than leveraged positioning.

Liquidity shift favors Ethereum

Stablecoin activity doesn’t dictate immediate price moves, but it does show where capital is prepared to move next. When flows tilt toward Ethereum, traders typically increase leverage across altcoin markets. That transition often marks the start of a “risk-on” cycle, with volatility rising as capital rotates away from Bitcoin (BTC).

This trend comes as October, often referred to as “Uptober”, begins with historical tailwinds. Over the past decade, Bitcoin has averaged 21.8% monthly gains in October. But the latest market data points to altcoins gaining more traction, with Ethereum dominance slipping and capital flowing toward high-beta tokens like Solana and decentralized exchange assets.

Signs of altcoin season building

Over 75% of the top altcoins have outperformed Bitcoin over the last 90 days, as per the Altcoin Season Index, which has risen to 76 out of 100, its highest level since Dec. 2024. The market value of altcoins, apart from Bitcoin and stablecoins, has more than doubled in the last month, reaching $1.63 trillion.

Meanwhile, Bitcoin dominance has dropped below 60% for the first time since July, highlighting rotation into smaller-cap assets. Additionally, analysts point out that substantial USDT mints, with values ranging from $1 billion to $3 billion, have been placed into exchanges, offering liquidity that often comes before sharp, high-risk asset movements.

Regulatory and macro drivers add to the setup. Recent rate cuts by the Federal Reserve and impending Securities and Exchange Commission rulings regarding spot ETFs for assets like Litecoin and XRP are viewed as catalysts. Trump’s promise to increase the Commodity Futures Trading Commission’s role in overseeing cryptocurrency and other political support have further improved sentiment.

Current liquidity patterns indicate that Ethereum may lead the next leg higher, even though the rally’s sustainability is dependent on funding rates, open interest, and exchange inflows. If history is a guide, capital rotating through ETH before spreading to smaller altcoins could mark the start of a new cycle.