The Great Rotation Is Here: Why ETH is Outperforming and What Comes Next

Happy Saturday all. Let’s take a close look at Bitcoin right now, because we just witnessed a textbook sentiment reset after hitting $112K.

We saw the initial breakdown of $116K that took us down to test that crucial 112k support level. This wasn't just any random level - it was a significant technical support zone that many traders, myself included, had identified as a key area to watch. This is where patient traders had their buy orders waiting, anticipating that this support would hold and provide the springboard for the recovery.

My Own Positioning and What It Revealed

I'll be honest - I was expecting prices to go even lower from that 112k test. I had additional buy orders staged below that level, anticipating we might see a deeper correction before finding our footing. Those lower orders are still sitting there, waiting.

But here's what changed my perspective: when Bitcoin broke back above 116k again, it showed me just how strong this market really is right now. That move above 116k wasn't just a technical breakout - it was a demonstration of underlying strength that I hadn't fully anticipated.

Think about it: if the market was truly weak and ready for a deeper correction, we wouldn't have seen that kind of decisive move higher after testing 112k. The fact that we not only held that support but then powered through 116k with conviction tells you something important about the current sentiment and the buyers waiting in the wings.

While I still maintain those lower buy orders (because you never know), the probability of hitting them has diminished significantly after seeing how the market handled that 112k-116k range.

Ethereum's Breakout Confirms the Thesis

Now here's where things get really interesting, and it validates something I've been talking about for weeks - Ethereum's outperformance against Bitcoin. Today we're seeing ETH hit $4,200 and make new highs on the ETH/BTC chart. This is exactly what I was anticipating.

I've been discussing Ethereum's setup for weeks, pointing to the technical patterns suggesting it was ready to outperform Bitcoin. The ETH/BTC chart was showing all the right signals - a breakout from consolidation, higher lows being established, and momentum building. Today's move to new highs on that pair confirms that this rotation is now officially ongoing.

The Multi-Month Rotation Playbook

From here, I see this playing out in a very specific sequence over the coming months:

Phase 1: ETH Rally Leading to Mini Alt Season - We're entering this phase now. Ethereum's strength will start pulling other altcoins higher as capital rotates out of Bitcoin dominance and into the broader crypto ecosystem. This phase could last several weeks.

Phase 2: Rotation Back to Bitcoin ($120k to $140k+) - Once Ethereum has had its run and alts have had their mini-season, smart money will likely rotate back into Bitcoin for the next major leg higher. This is where we could see Bitcoin push from current levels to $120k and potentially $140k or beyond. During this phase, alts will likely lag as capital concentrates back into Bitcoin.

Phase 3: Final Rotation to ETH/Alts for the Blowoff - The final phase would see another rotation back into Ethereum and altcoins for what could be the final major move of this market structure. This is where you often see the most explosive moves in alternative assets.

This entire sequence will take months to fully play out, but understanding the rotation pattern helps position for each phase.

Bitcoin Dominance and What It Really Means

Bitcoin dominance is looking quite bearish right now - hitting fresh lows and showing clear breakdown signals. But here's the important context: this breakdown is mainly because of Ethereum's strength, not necessarily broad-based weakness in Bitcoin itself.

This is a crucial distinction. When dominance falls due to one strong asset (Ethereum) rather than broad-based altcoin strength, it creates a different dynamic. I still believe Ethereum is more likely to outperform both Bitcoin AND altcoins in the next couple of weeks, which is exactly why my portfolio is so heavily weighted toward ETH right now.

The chart below shows ETH's performance against the total altcoin market (excluding stablecoins), and the results are striking.

Since April, Ethereum has outperformed the entire altcoin sector by an impressive 47%. Think about this: while altcoins have posted solid gains from their spring lows, Ethereum has managed to outpace the collective performance of all these assets by nearly 50%.

This kind of outperformance doesn't happen by accident. It signals where smart money is flowing and exactly why my portfolio allocation has shifted so heavily toward ETH.

Portfolio Positioning for the Rotation

This Ethereum outperformance thesis is why I've positioned so heavily in ETH. While Bitcoin is showing technical strength and completing its sentiment reset, Ethereum is actually breaking out to new relative highs. That's a powerful combination - you want to be positioned in the asset that's showing leadership while the overall market structure remains healthy.

The ETH/BTC breakout to new highs today validates weeks of analysis pointing to this rotation. Rather than trying to catch every move in every asset, focusing on the clear leadership (Ethereum) while maintaining some Bitcoin exposure for the later phases makes the most sense from a risk-adjusted return perspective.

Final Thoughts: The Four-Year Pattern and Managing Expectations

I'm going to be honest here - when Ethereum starts to move like this, I'm starting to get a bit of PTSD from last cycles. Historically, when ETH begins its major outperformance phase, it's usually signaling we're approaching the final moves within the four-year pattern.

Looking at the timing, Bitcoin now has around 12 weeks left until the usual top occurs - typically in late October of the third year within the four-year structure. I've said it before, and I want to be clear: it's not me saying Bitcoin has to top there, but that's when it usually did in previous patterns. So I would at least be mindful of that timing and consider taking some profits around that window.

From there, I'm still open to the idea - particularly given all the institutional involvement we're seeing - that Bitcoin could have another major move. If we follow historical precedents, that could span around 30 weeks and deliver gains of roughly 90%. Such a scenario could take us into Q2 2026 with a price target around $170k.

But again, that's the very optimistic scenario, and honestly, I'd rather just focus on where we stand right now. The beauty of understanding these patterns isn't to predict the future with certainty, but to stay aware of the typical timing bands and risk levels.

We're in a position where the next 12 weeks could be incredibly rewarding, but they might also represent the final major opportunity of this structure. That's why taking some profits into strength - especially if we get that rotation back to Bitcoin pushing toward $120k-$140k - becomes increasingly important as we approach those traditional timing windows.

The institutional narrative could certainly change the game and extend things beyond the typical pattern, but prudent risk management suggests we should at least acknowledge where we sit in the historical framework, even while remaining open to new possibilities.

For my own BTC and ETH positions, I'll be relying on my Smart Exit Decoder to identify optimal selling points when we reach those key levels. It's designed to spot overbought conditions across multiple timeframes - exactly what you need when navigating these potentially final major moves.

Thanks for reading.

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Written by Timothy Assi, an Elite Popular Investor on eToro.

Not investment advice. eToro is a multi-asset investment platform. Your capital is at risk. For information and educational purposes only.

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