In early 2026, the crypto market has entered a critical juncture. After a significant shakeout at the end of 2025, the overall market flow is quietly changing.

Recently, many traders have been watching a phenomenon—the "Shanzhai Season." This cyclical event always signifies one thing: a large amount of capital begins to withdraw from Bitcoin and shift to other cryptocurrencies. The process usually unfolds as follows: funds first flow from Bitcoin into leading coins like Ethereum, then spread to mid- and small-cap altcoins, forming a stepwise rotation. Historically, the Shanzhai Season often coincides with a decline in Bitcoin-dominated indices.

Looking at recent data, you can feel this change. Since August 2025, signs of rotation have been quite evident—after Bitcoin surged past $120,000, it entered a consolidation phase, while Ethereum's gains started to outpace Bitcoin. By the end of 2025, Bitcoin's dominance index had fallen to 57.7%, while Ethereum's dominance index rose to 14.0%. In contrast, the share of small- and mid-cap coins (OTHERS index) remained low. What does this indicate? It shows that capital has not yet flowed massively into high-risk small-cap tokens; we are still in the early stage of rotation.

The consensus in trading circles is that if Ethereum can break through the $5,000 mark and mainstream altcoins achieve 2 to 3 times gains, then capital may further flow into tracks like AI, RWA, and blockchain gaming.

This round of Shanzhai Season is different from the one in 2021. The 2021 surge was a "floodgates" style broad rally, whereas this time it may present more of a "localized carnival"—on one hand, institutional funds are still deploying through Bitcoin spot ETFs, and on the other hand, retail investors and small to medium-sized funds are the main drivers pushing altcoins higher.