The End of Rising BTC Dominance

The current phase of BTC dominance started around the beginning of 2023. During that time, Bitcoin’s share of total crypto market cap rose from 40% to a peak of 66% in June this year. More recently, we have seen a significant decline to a level of 58% today, the first major fall since the last “Altcoin Season” in 2021.

Source: Trading View, Forteus Research

This reflects a rotation pattern seen in prior cycles: after Bitcoin’s lead phase, capital tends to move down the risk curve, initially into larger-cap tokens and subsequently into mid- and small-cap altcoins in search of higher beta. Because these smaller assets are higher beta and less liquid, even modest outflows from BTC can result in disproportionately large price moves in alts, amplifying their relative outperformance. As can be seen from the chart above, if history is to be repeated, there is room for this rotation to continue.

ETH Leading the Rotation

Ethereum has been at the forefront of this rotation. Since April, ETH has outperformed BTC by more than 100%, with the ETH/BTC pair rising from 0.019 to 0.040. Flows into spot ETH ETFs and newly launched Ethereum Digital Asset Treasuries (DATs) have reinforced this momentum, signaling durable demand.

Source: Coingecko, Forteus Research

Other altcoins are also beginning to benefit, with several altcoins now ahead of BTC year-to-date. This outperformance is being driven by 2 main factors:

• Improving fundamentals driven by expanding integration of blockchain into traditional finance, scaling real-world use cases, and a far more constructive U.S. regulatory environment, not least the GENIUS Act.

• Strong flows into spot ETH ETFs and Digital Asset Treasuries (DAT), with recent launches including Tron, Crypto.com and last week’s $1B commitment from Jump, Multicoin, and Galaxy into its Solana DAT.

Source: Coingecko, Forteus Research

Higher Dispersion is Positive for Fundamental Token Selection

As we enter this new phase, the market is increasingly differentiating between assets,  with greater dispersion replacing the broad-based “melt-up” seen across altcoins in 2021. We expect this trend to persist, as the rapid growth in the number of altcoins over the past five years makes fundamentals-driven token selection ever more important. The chart below shows the high level of price dispersion exhibited amongst the top 50 tokens in August. We have highlighted tokens included in our portfolio.

Source: Coingecko, Forteus Research

This environment represents a great opportunity set for active token selection that we have been capitalizing on.

Outperformance vs Passive Approaches

Our research-driven approach has consistently demonstrated the ability to identify winners and adapt to shifting market regimes:

• Conviction positions in assets like TRON, HYPE, AAVE and AERO have delivered strong returns since the Liberation Day tariff scare.

• Smart rotation away from fully valued tokens such as MKR into assets that were lagging the move in ETH, such as LINK and LDO.

• Momentum capture during Q3 in retail-driven names such as SOL and CRO has added value.

As a result, both the Forteus Digital Asset Select Fund (DAS) and the Digital Asset Select Altcoin Fund (DAS Alts) have outperformed passive benchmarks in Q3 (beginning of current altcoin momentum) as well as year-to-date, and since inception.

Note: Neither index is investible and represent theoretical values excluding any fund or trading costs BDM Ex-MegaCap Index is a broad market-cap weighted index of altcoins (excluding BTC, ETH, stablecoins, wrapped tokens) prepared by S&P MVB100EW is an equal-weighted index of top100 tokens (excluding stablecoins and wrapped tokens) *DAS inception 24 May 2023

Positioning for What’s Next

While changes in market cycles rarely happen in straight lines, we believe Bitcoin’s dominance has further room to decline, with Ethereum and altcoins poised to lead the next phase. Growing dispersion across tokens - and the lack of investible index products - makes fundamental selection and active management more critical than ever.

DAS and DAS Alts are designed for exactly this environment: offering diversified, actively managed exposure to BTC, ETH, and high-conviction altcoins. Our research-driven approach and dynamic allocation have already delivered meaningful outperformance versus passive benchmarks.

We would welcome the opportunity to discuss our outlook and how our funds can help you benefit from this next stage of the market.