Ethereum: How Long-Term Staking Could Propel ETH's Next Breakout

2026 has begun with intense competition among altcoins. Observing the market from a broader perspective, the Altcoin Season Index has surged back to levels seen in October, marking a 35% increase in less than 48 hours. Meanwhile, Bitcoin's dominance (BTC.D) faces significant resistance near the 60% threshold.

Key Takeaways

The altcoin market is witnessing a surge in competition as the Altcoin Season Index experiences a 35% spike.
Ethereum's dominance has not led this altcoin rally, indicating weak rotational flows into ETH.
Long-term staking activity for Ethereum remains strong, with no exits and 1.7 million ETH queued for staking.
Staking rewards are encouraging a shift from short-term investments to a long-term strategy among Ethereum holders.
This change could lead to a potential breakout for Ethereum as market conditions improve.

Ethereum

This shift indicates a clear rotation of capital into altcoins. However, when we examine Ethereum's dominance (ETH.D), it appears that this round of altcoin movement is not being spearheaded by Ethereum [ETH].

ETH.D Source: TradingView (ETH.D)

As illustrated in the chart, ETH.D declined at the same time the Altcoin Season Index rebounded. During this period, Ethereum experienced a near-5% drop from the $3,300 range, while the ETH/BTC ratio fell by 3%. Simply put, the typical Ethereum-led altcoin rally isn't occurring this time around.

This raises an important question: Is the absence of these rotational flows diminishing ETH’s advantage and stalling its breakout? Interestingly, another trend seems to be surfacing, possibly shaping Ethereum’s unique positioning this cycle.

Ethereum: Transitioning from Quick Bets to Strategic Investments

Ethereum investors appear to be demonstrating a distinct preference this cycle. In the realm of altcoins, Monero [XMR] is at the forefront, boasting a 55% increase over the past 90 days. In contrast, ETH has only risen by 5%, falling short of XMR by nearly ten times. This trend indicates a weakness in the rotational flows towards Ethereum.

However, a closer examination reveals a different scenario. Ethereum staking flows remain robust, with no exits and 1.7 million ETH queued for staking over the next 30 days, pushing staking levels to a three-year high.

Ethereum Source: Validator Queue

Essentially, ETH flows are transitioning from short-term speculative investments to long-term strategies. The driving factor? Staking rewards. For instance, 21Shares will initiate payments to holders on January 9 at a rate of $0.010378 per share, providing a compelling reason to keep ETH locked up and reinforcing this long-term strategy shift.

Consequently, Ethereum is maintaining a steady range while Bitcoin [BTC] continues to fluctuate sideways. In the past, such scenarios typically prompted quick inflow of short-term investments as a hedge into ETH. However, circumstances are starting to shift.

With the movement of Ethereum flows, the increasing staking supply shock could potentially create the conditions for a breakout when the market regains its risk appetite, possibly bestowing Ethereum with a real competitive edge over Bitcoin and other altcoins.