Ethereum's ETH/BTC ratio has climbed 10%+ in Q3, putting it on track for its strongest quarterly performance since the 56% rally in Q3 2025, according to AMBCrypto reports. Ethereum surged 18.55% in July, more than 2x Bitcoin's return, highlighting a textbook rotation from BTC into ETH. The total crypto market cap has gained 6%+ this quarter, putting the market on track for its first bullish quarterly close since Q3 2025. Bitcoin dominance has yet to reclaim the 60% level, with the key question being whether this momentum can be sustained through the rest of Q3. Unless BTC.D breaks above that resistance, calling for a sustained crypto rally through the rest of Q3 may be premature, especially with BTC historically underperforming in August and September.
Ethereum's ROI is catching investors' attention with a similar setup to 2025 emerging, when Ethereum closed Q3 up 66.55%, marking its strongest quarterly rally on record. The 2025 move was fueled by a 48% rally in July and an 18% gain in August before a healthy 5% pullback in September, with Bitcoin returning just 6.31% over the same period. The ETH/BTC pair gained 56%+ in 2025, suggesting that nearly 84% of ETH's Q3 gains were driven by capital rotating out of BTC, while the remaining upside came from ETH's own market strength. A similar setup may now be taking shape, with the 10% gain in the ETH/BTC ratio so far this quarter and rising on-chain accumulation pointing to another ETH-led rally.
Ethereum's exchange supply ratio has dropped to 0.127, marking the lowest level on the chart, according to AMBCrypto reports. ETH dominance closed July up more than 11%, signaling that Ethereum is gaining a larger share of the total crypto market rather than simply benefiting from short-term capital flows. **Combined with rising institutional demand, the declining liquid supply strengthens the case for another "ETH-led" rally. Institutional buying backs the move up, with BitMine and Arthur Hayes keeping added ETH through a month when spot ETH ETFs pulled in fresh inflows while Bitcoin funds saw redemptions. Sustained flows into ETFs would indicate that institutions are carving out a separate allocation to ETH, with the momentum of inflows being decisive for the token's performance.
Ethereum's share climbed to 10.5% while the category tracking everything else, thousands of smaller tokens outside the top two, has been on a slide and dropped to 30.8%, as reported by CoinDesk. This squeeze isn't new, with altcoin sell pressure outside Bitcoin and Ethereum running for 15 straight months through mid-June. The concentration in major assets suggests institutional and retail investors are focusing on established players rather than diversifying across the broader altcoin ecosystem. Layer-1 tokens could see gains if their networks exhibit signs of increased adoption, on-chain fees, developer activity, and stablecoin liquidity, while infrastructure projects that solve interoperability, data availability, storage, tokenization, and scaling may also see inflows. Altcoins have the best chance to benefit from the latest Fed decision if macro trends start to improve and liquidity conditions stabilize, with tokens representing alternative assets, such as layer-2 and layer-1 networks and AI applications, having the best chance of benefiting.
The outlook for Bitcoin, Ethereum, and altcoins in August will be dictated by inflation, jobs, treasury yields, dollar strength, ETF flows, and the timing of the next rate hike. The most important factor influencing Bitcoin's outlook is the CPI report scheduled for August 12, with a lower-than-expected reading contributing to a dovish outlook and potentially triggering rate cuts. The NFP report for July employment data will be released on August 7, with moderate prints and lower-than-expected wage growth contributing to the soft landing narrative. The Jackson Hole Symposium runs August 27-29, with the event's theme of "Financial Innovation and Its Implications for Payments and Policy" being of particular interest to crypto investors. Flows into Bitcoin and Ethereum ETFs will be a critical short-term indicator for institutional demand, with the allocation between Bitcoin and Ethereum being an essential indicator as the demand for both assets will suggest a broad institutional interest in crypto. AI tokens could see a re-rating if the macro environment allows for increased adoption of decentralized data and computational resources, with emphasis on actual use cases rather than narrative-driven projects.
