The bitcoin market has always exhibited cycles, including rallies, corrections, euphoric bull runs, and severe bear markets. However, a more subtle and strategic phenomenon has recently caught the attention of investors: market rotation. People are uncertain about whether a genuine market rotation is underway or if this is merely market noise. They observe money shifting from one type of digital asset to another, such as from Bitcoin to altcoins or from DeFi to AI tokens.
To understand this better, we need to look at more than just current price movements. We also need to consider the broader picture, including the economy as a whole, on-chain data, and changes in specific areas. This report aims to provide a clear, semantically rich insight into the crypto market rotation story, encompassing the perspectives that traders, analysts, and long-term holders need to know.
What is market rotation in crypto?
Market rotation occurs when capital shifts from one sector of the market to another. For traditional investors, this could mean transferring from tech to industrial stocks. In crypto, money flows from Bitcoin to altcoins, Layer 1 blockchains to Layer 2 scaling solutions, DeFi tokens to NFTs or gaming ecosystems, and so on.
In the cryptocurrency market, market rotation isn’t a novel idea. There are specific essential cycles, such as the ICO crisis after 2017 and the DeFi Summer of 2020, that demonstrate how investor interest and liquidity fluctuate in waves. Every time, stories, tokenomics, and trends in user adoption affected the movement. This illustrates how sentiment and utility can influence capital movements.
Bitcoin Dominance: A Key Sign
Bitcoin dominance, or the proportion of the overall cryptocurrency market value that Bitcoin controls, is a crucial aspect of any market rotation research. When BTC dominance increases, it typically indicates that investors are shifting into Bitcoin, as they perceive it as a safer investment. When dominance decreases, it usually suggests that it’s altcoin season, as investors become more willing to take risks and seek assets with higher beta.
Bitcoin’s supremacy remains unstable as of June 2025, fluctuating between 51% and 53%. This level suggests that Bitcoin remains the primary currency on the market. Still, people are increasingly willing to switch to altcoins, particularly for reasons such as AI tokens, decentralised social platforms, and Real World Asset (RWA) tokenisation initiatives.
AI Tokens and RWA Tokens: Sector Rotation Take the Stage
The performance of AI-linked tokens, such as Render (RNDR), Fetch.ai (FET), and SingularityNET (AGIX), has been particularly notable over the past few weeks. As more people become interested in the connection between blockchain and AI, partly due to the progress made by OpenAI, Anthropic, and Meta, AI tokens have skyrocketed as investors speculate about their potential applications in the real world.
At the same time, Real World Asset tokenisation has gained popularity, thanks to initiatives by major companies like BlackRock, which recently created a tokenised fund on the Ethereum blockchain using the Securitise protocol. This marks a significant turning point in the convergence of traditional financial and decentralised systems, demonstrating that blockchains can be utilised for purposes beyond speculative trading.
These changes indicate that crypto investors are not just following the excitement; they are also becoming increasingly interested in stories that are based on utility and how they can be applied in the real world. This is a sign of a maturing market.
Activity in altcoins: Is an altseason coming?
Several factors will determine whether an altseason is approaching soon. In addition to Bitcoin’s supremacy, analysts are closely watching the ETH/BTC trading pair, which has historically been a reliable indicator of altcoin strength. As Ethereum and other Layer 1 networks, such as Solana, Avalanche, and Toncoin, attempt to regain momentum, money is starting to flow toward these platforms, especially those with scalable ecosystems and tools that facilitate easy development.
The total value locked (TVL) and the number of active users for DeFi protocols, including Aave, Uniswap, and Curve, have also been rising, which is an indication of growing popularity. This comeback aligns with the rotation thesis, as investors are reevaluating the fundamental building blocks of decentralised finance, perceiving them as undervalued compared to meme coins and other highly speculative assets.
Significant Changes in the World
The Federal Reserve’s policy remains a significant factor in the cryptocurrency markets. As inflation slows and people expect interest rates to decrease in late 2025, investors are becoming more willing to take risks. In the past, low interest rates have led to increased investment in riskier and growth-oriented assets, with cryptocurrency being one of the most significant beneficiaries.
The introduction of several spot Bitcoin ETFs earlier this year has also added new liquidity to the industry. BlackRock, Fidelity, and ARK Invest are just a few of the companies that now provide regulated ways to buy Bitcoin. This is having an impact on other cryptocurrencies as investors seek higher returns than those offered by Bitcoin.
Rotation of On-Chain Data
On-chain analytics solutions, such as Glassnode, Santiment, and IntoTheBlock, provide further evidence that the market is shifting. Exchange flows indicate that fewer bitcoins are being received and more altcoins are being stored in both hot and cold wallets. Wallet activity on Ethereum, Solana, and Arbitrum is increasing, indicating that more people are using these platforms beyond Bitcoin.
Network fee trends also show this change. Gas fees on Ethereum have increased since there are more transactions on the blockchain related to DeFi and NFTs. Layer 2 networks, such as Optimism and Base, have also experienced significant activity, which supports the idea that money is moving to ecosystems with less friction and more room for innovation.
Investor Intent: Looking for Yield, Not Just Hype
In the past, market rotation was often driven by speculation, particularly during the peak of meme coin manias. However, today, there is an increasing desire for ways to earn money and utilities that last. Protocols that enable staking, liquid restaking (via platforms like EigenLayer), and generating real-world yield through Real-World Assets (RWAs) are attracting long-term investors, rather than just short-term speculators.
This shift in investor behaviour indicates that the market is evolving in a more informed manner, driven not only by momentum but also by value-seeking and fundamental considerations.
