Don't Buy Ethereum Until This Happens
Key Points
Ethereum, down 31% for the year, won't see a reversal of fortune until there has been a fundamental change in market sentiment.
One way to measure this market sentiment is with the Altcoin Season Index.
If the Altcoin Season Index gives a reading of 75 or higher, it will be time to buy Ethereum.
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Ethereum (CRYPTO: ETH) is now down almost 60% from its all-time high from six months ago and currently trades for a price of just $2,100. For the year, the world's second-largest cryptocurrency is down 31%.
Given those bleak numbers, there's only one event that would cause me to change my mind on Ethereum. Thankfully, this one event typically happens once per year, and there's plenty of time for it to happen in 2026.
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Altcoin Season
That event, of course, is the arrival of altcoin season in the crypto market. Roughly speaking, this is the time of the year when altcoins such as Ethereum outperform Bitcoin (CRYPTO: BTC), the market bellwether.
In search of higher and higher returns, investors begin to invest more of their portfolio in risky altcoins during this period. The higher the risk, the greater the reward. Often, this is when altcoins turn in their biggest gains of the year, so investors need to be there when it happens.
Image source: Getty Images.
The calculation of whether it is altcoin season is remarkably simple. All you do is check how many of the top 100 cryptocurrencies in the world are outperforming Bitcoin during the past 90 days. If that number is higher than 75 on the Altcoin Season Index, then it is altcoin season. If it is not, it is Bitcoin season.
Right now, the Altcoin Season Index is at 34. This means that 34 of the top 100 cryptocurrencies in the world are outperforming Bitcoin during the past three months.
Ethereum does not need to be outperforming Bitcoin during the past 90 days for this indicator to work. In fact, Ethereum is down 37% during the past 90 days, while Bitcoin is down 23%.
But all that really matters is the overall risk preference of investors. If they move from a risk-off mentality to a risk-on mentality, that's when they will be ready to move their money into Ethereum.
How long will investors need to wait?
Near the end of 2025, the thinking was that altcoin season might be right around the corner. As soon as the Federal Reserve cut interest rates in 2026, liquidity would pour into the market, and a tsunami of money would start flowing into crypto.
But since then, there have been several events that have spooked investors, including geopolitical tensions and military conflict in the Middle East and even higher global tariffs. With that in mind, investors are once again recalibrating risk and reward. If they determine that the risk is worth it, they will soon pile into altcoins such as Ethereum.
So keep your eyes on the Altcoin Season Index. As soon as it flashes green, it will be time to buy Ethereum.
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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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