For the first time in five years, the Russell 2000 Index (IWM) hits a new all-time high, while Bitcoin hits a new all-time high Typically peaking at the same time, it’s out of sync now and remains 27% below October’s record. History suggests that the largest cryptocurrencies and the broader cryptocurrencies may be catching up.
The Russell 2000 index of U.S. small-cap stocks hit a record high on Thursday, as did measures of larger companies such as the Dow Jones Industrial Average (DJIA) and the S&P 500. The Nasdaq 100 index is just below its all-time high, and metals led by silver also hit new highs.
Since 2020, new Russell 2000 highs have generally coincided with new Bitcoin highs . This consistency was evident in November 2021, when Bitcoin peaked at $69,000. It occurred again in early November 2024, when Bitcoin topped $90,000, and again in mid-October, when Bitcoin surged to $126,000. Both bottomed on November 21st.
Milk Road Macro notes on X that smaller, riskier companies are more sensitive to changes in interest rates than larger stocks. This sensitivity is particularly important after the Federal Reserve cut interest rates by 25 basis points on Wednesday. Goldman Sachs said its forecast for Russell 2000 earnings per share growth in 2026 is unusually strong, at around 49%.
Meanwhile, markets are now pricing in another 50 basis points of rate cuts over the next 12 months, according to data from the CME Group’s FedWatch Tool. These will provide a further boost to risk assets such as cryptocurrencies.
Fed starts buying Treasury bills
Another source of liquidity is the start of the Federal Reserve’s Treasury bill purchase program. The move will begin later on Friday with an initial $8.2 billion investment as part of its reserve management plan, according to ZeroHedge.
The purchases are part of a broader $40 billion Treasury purchase program that began on December 12 and will also reinvest maturing agency securities, marking a renewed injection of liquidity into money markets.