It's time to start making profits again: The breakout of the Russell 2000 index may signal the charge for cryptocurrency

Author: Our Crypto Talk

Compiled by: Yuliya, PANews

What this article will discuss is not a cryptocurrency chart, nor the narrative of some Meme coin, and it is not temporarily related to Bitcoin. We will focus on the Russell 2000 Index, which is quietly completing a feat that has only occurred twice in its history: breaking through, thereby driving a return of risk appetite.

If you have been in the market long enough, you have seen this "movie" more than once.

A Pattern Continuously Ignored by Most

History always repeats itself; even if you don't believe in cycles, you should respect this repetitiveness.

• In 2017, the Russell 2000 Index broke through, and then the "altcoin season" arrived.

• In 2021, the Russell 2000 Index broke through again, and the "altcoin season" played out once more.

Although the market narratives differ each time and the popular tokens vary, the underlying driving mechanisms are the same.

Now, in January 2026, the Russell Index has broken through 2600 points for the first time in its history.

This breakthrough is not an illusion, nor a false fluctuation caused by thin trading during the holiday period, but a comprehensive breakthrough with huge trading volume and broad foundations, with the index having risen about 15% since the beginning of the year.

What Does the Russell Index Truly Represent?

Trading in small caps is not based on market sentiment or feelings, but is a liquidity trade.

The Russell Index tracks about 2000 smaller U.S. companies, including regional banks, industrial firms, biotech companies, and more. The survival and development of these companies are closely related to the lending environment and growth expectations.

• When liquidity tightens, these companies suffer severe blows.

• When liquidity eases, they lead the entire market.

This is why the Russell Index never initiates in defensive markets; however, when risk appetite returns, it often becomes the leader. Therefore, the breakthrough of this index is not a simple technical phenomenon; it is a clear signal: capital is moving down the risk curve in search of higher returns.

This Is Not an Isolated Event: Support from the Macro Background

Zooming out, you will find that the current macro background aligns disturbingly with this trend.

• The Federal Reserve is quietly providing support for market reserves by purchasing Treasury bills. While this is not comprehensive quantitative easing (QE), it is enough to alleviate funding pressures and inject lubricant into the credit market.

• The U.S. Treasury is reducing its total account (TGA) balance, which means pushing cash back into market circulation rather than pulling it out.

• Fiscal policy is gradually easing at the margins, such as larger tax refunds, potential consumer subsidies, and lowering interest rates by purchasing mortgage-backed securities, thereby freeing up household and business balance sheets.

Individually, none of these measures constitutes a strong "stimulus" signal. But when they come together, they form a powerful liquidity waterfall. And liquidity is never static.

The Real Path of Liquidity Transmission

This is often a misunderstood part. Liquidity does not "transfer" from cash to altcoins out of thin air; it flows in a certain order and hierarchy:

• First, it stabilizes the bond and financing markets.

• Then, it pushes up the stock market.

• Next, it looks for higher beta (high risk, high return) assets within the stock market.

• Only after that does it spill over into alternative asset classes.

Small caps are in the middle of this chain. They are riskier than mega caps, but their logic is clear and easy to understand for institutional investors. When small caps start to outperform the market, it usually means that capital's gaze has moved beyond "safety" to chase "growth."

This is why the breakthrough of the Russell Index historically always signals a broader expansion of risk assets. This is not a coincidence, but a mechanical and inevitable transmission process.

The Position of Cryptocurrency Within This

The cryptocurrency market is not the leader of the liquidity cycle but rather an amplifier.

When the Russell Index enters a sustained upward trend, higher beta assets often lag behind. Historical data has repeatedly shown that ETH and altcoins typically respond one to three months later.

This is not because traders are staring at the Russell Index on trading software (like TradingView), but because the same liquidity that drives capital into small caps will ultimately seek assets with higher "convexity" (the potential for large returns with smaller risks).

And cryptocurrencies, especially those that have experienced capitulative sell-offs, thin order books, and exhausted selling power, are precisely the endpoint of this search. This is exactly the landscape the crypto market faces at the beginning of 2026.

Why Does This Feel Different, Yet the Essence Remains the Same?

Every cycle comes with reasons for "this time is different."

• In 2017, it was the excessive bubble of ICOs.

• In 2021, it was excessive leverage and market bubbles.

• In 2026, it is regulatory uncertainty, macroeconomic concerns, and market fatigue.

These superficial explanations change, but the laws of capital flow do not.

What is different now is that the current market "pipeline system" (i.e., infrastructure) has greatly improved: clearer regulatory frameworks, institutional-level custody standards, spot ETFs continuously absorbing market supply, and reduced excessive speculative leverage at the market's margins.

Even industry insiders are beginning to openly discuss previously undisclosed viewpoints. When CZ talks about a potential "super cycle," he is not referring to hype but rather the synergy of multiple factors: liquidity, regulation, and market structure finally starting to move in the same direction. This synergy is extremely rare.

Mistakes Being Made by Crypto Native Traders

Most cryptocurrency traders are still fixated on crypto charts, waiting for the market to confirm signals on its own. But this is often too late.

When altcoins start to soar in price, the rotation of capital has already completed in other markets. The signals of returning risk appetite first appear in those markets that can rise without relying on hype. Small caps are one such market. They are not driven by memes but are rising because borrowing has become easier and capital has regained confidence.

Therefore, if you ignore the breakthrough of the Russell Index because "this has nothing to do with crypto," you completely miss the point.

The True Meaning of "Super Cycle"

A "super cycle" does not mean that all assets will rise forever. It means:

• Structural support: The duration of the rise will be longer than people expect because it is driven by market structure rather than fleeting euphoric sentiment.

• Pullbacks are absorbed: Market pullbacks will be absorbed by buying pressure and will not evolve into cascading crashes.

• Capital rotation rather than exit: Capital will rotate between different sectors rather than completely withdrawing from the market.

• High beta assets gain vitality: After years of suppression, high-risk, high-return assets finally gain breathing room and upward space.

This is precisely the environment in which altcoins stop "bleeding" and begin to be revalued. Not all altcoins will rise, and the extent of the rise will not be uniform, but the trend will be decisive.

The Signals Are on the Table

The Russell Index breaking through historical highs is by no means a coincidence. When it happens, it is inevitably accompanied by easing liquidity, a return of risk tolerance, and capital deciding to move again.

• It did so in 2017.

• It did so in 2021.

• It is doing so now.

You do not need to predict specific target prices, nor do you need to precisely grasp the exact timing of rotations. You only need to recognize that when small caps lead the market, it is telling you what will happen next.

The crypto market has previously ignored this signal and usually regrets it months later.