For the first time in five years, the Russell 2000 Index (IWM) has achieved record highs, while Bitcoin (BTC) remains 27% lower than its October peak of $92,578.40. This disconnection is noteworthy, as historically, Bitcoin has tended to rise in tandem with the Russell 2000, suggesting a potential synchronization in the near future.
The Russell 2000, a key indicator of U.S. small-cap stocks, reached new heights recently, joining major indices such as the Dow Jones Industrial Average (DJIA) and the S&P 500 Index, both of which also posted record numbers. The Nasdaq 100 is hovering just below its all-time high, while metals, particularly silver, are achieving significant gains.
Historically, peaks in the Russell 2000 have often coincided with those of Bitcoin. For example, this alignment was evident in November 2021 when Bitcoin hit $69,000 and again in early November 2024 when it exceeded $90,000. The most recent surge occurred in mid-October when Bitcoin reached $126,000 before both indices bottomed on November 21.
According to Milk Road Macro, smaller, more volatile companies are more susceptible to fluctuations in interest rates compared to larger, established firms. This sensitivity is particularly relevant in light of the Federal Reserve”s recent 25 basis-point rate cut.
Looking ahead, expectations for earnings-per-share (EPS) growth for the Russell 2000 are robust, with projections around 49% growth for 2026, as reported by Goldman Sachs. Additionally, the market is currently pricing in another 50 basis points of rate cuts over the next year, which could further stimulate interest in riskier assets like cryptocurrencies.
Another factor contributing to liquidity in the markets is the commencement of the Federal Reserve”s Treasury bill purchase program. This initiative, set to begin soon, will kick off with $8.2 billion as part of its reserve management strategy, forming part of a wider $40 billion Treasury bill purchase plan. This influx of liquidity signals a renewed opportunity for investment in riskier assets, including Bitcoin and other cryptocurrencies.
As the financial landscape adjusts to these developments, the potential for Bitcoin to catch up with the upward momentum of small-cap stocks remains a key focus for investors and analysts alike.
