It's time to start making profits again: A breakout of the Russell 2000 index may be the clarion call for a crypto rally.

Author: Our Crypto Talk

Compiled by: Yuliya, PANews

This article is not about a cryptocurrency chart, nor a narrative about any meme coin, and is even temporarily unrelated to Bitcoin. Our focus is on the Russell 2000 Index, which is quietly accomplishing something that has only happened twice in its history: a breakout, thereby triggering a return to risk appetite.

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

A pattern that has been consistently ignored by most people

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

• In 2017, the Russell 2000 index broke through, and then the "copycat season" arrived.

• In 2021, the Russell 2000 index broke through again, and then the "copycat season" was staged again.

Although each market narrative is different and popular tokens vary, the underlying driving mechanism is the same.

Now, in January 2026, the Russell 2020 index will break through 2,600 points for the first time in history.

This breakout is not an illusion, nor is it a false fluctuation caused by thin trading during the holiday. Rather, it is a comprehensive breakout with huge trading volume and broad market base. The index has risen by about 15% year-to-date.

What does the Russell index truly represent?

Trading in small-cap stocks is not based on market sentiment or feeling, but rather on liquidity.

The Russell 500 index tracks approximately 2,000 smaller U.S. companies, including regional banks, industrial enterprises, and biotechnology companies. The survival and development of these companies are closely linked to the lending environment and growth expectations.

• These companies will be severely impacted when liquidity tightens.

• When liquidity is ample, they lead the entire market.

This is why the Russell 500 index never leads the charge in defensive markets, but often becomes a leader when risk appetite returns. Therefore, a breakout in this index is not a simple technical phenomenon; it is a clear signal that capital is moving down the risk curve in search of higher returns.

This is not an isolated incident: supported by the macroeconomic background.

If you broaden your perspective, you'll find that the current macroeconomic context and this trend form an unsettling alignment.

• The Federal Reserve is quietly supporting market reserves by purchasing Treasury bills. While this is not full-scale quantitative easing (QE), it is sufficient to alleviate funding pressures and lubricate the credit market.

• The U.S. Treasury is reducing the balance of its General Account (TGA), which means pushing cash back into circulation rather than withdrawing it.

• Fiscal policy is gradually easing on the fringes, with measures such as larger tax rebates, 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 would constitute a strong "stimulus." But when they come together, they create a powerful waterfall of liquidity. And liquidity is never static.

The true transmission path of liquidity

This is a part that people often misunderstand. Liquidity doesn't magically "transfer" from cash to altcoins; it flows in a specific order and hierarchy:

• First, it will stabilize the bond and financing markets.

• Then, it will drive up the stock market.

• Next, it will look for assets with higher beta (higher risk, higher return) within the stock market.

• Only after that will it spill over into the alternative asset space.

Small-cap stocks occupy the middle link in this chain. They are riskier than mega-cap stocks, but for institutional investors, the logic is clear and easy to understand. When small-cap stocks start to outperform the market, it usually means that capital has moved beyond "safety" and begun to pursue "growth."

This is why historically, breakouts in the Russell 500 index have often foreshadowed broader expansion in risk assets. This is not a coincidence, but a mechanical and inevitable transmission process.

The place of cryptocurrencies in it

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

When the Russell 500 index enters a sustained upward trend, assets with higher betas tend to lag behind. Historical data has repeatedly shown that ETH and altcoins typically react within one to three months.

This is not because traders are glued to the Russell index on trading software (such as TradingView), but because the same liquidity driving capital into small-cap stocks will eventually seek assets with higher convexity (i.e., the potential for huge returns with less risk).

Cryptocurrencies, especially those markets that have experienced capitulation sell-offs, thin order book depths, and exhausted selling pressure, represent the endpoint of this search. This is precisely the landscape the crypto market will face in early 2026.

Why does it feel different this time, even though the essence remains the same?

Every cycle has a reason for "this time being different".

• 2017 was a year of excessive ICO bubble.

• 2021 was marked by excessive leverage and market bubbles.

• 2026 will be marked by regulatory uncertainty, macroeconomic concerns, and market fatigue.

These superficial explanations may change, but the underlying principles of capital flow remain the same.

Unlike in the past, the market's "pipeline system" (i.e., infrastructure) has been greatly improved: a clearer regulatory framework, institutional-level custody standards, spot ETFs continuously absorbing market supply, and a reduction in excessive speculative leverage at the market periphery.

Even industry insiders are starting to openly discuss views that were previously kept secret. When CZ talks about a potential "supercycle," he's not referring to hype, but rather the synergy of multiple factors: liquidity, regulation, and market structure are finally starting to move in the same direction. This synergy is extremely rare.

Mistakes Crypto Native Traders Are Making

Most cryptocurrency traders are still glued to crypto charts, waiting for confirmation signals from the market itself. But by then, it's usually too late.

When altcoins begin to surge in price, capital has already been rotated through other markets. This signals a return of risk appetite.

This phenomenon first appears in markets where prices can rise without relying on hype. Small-cap stocks are one such market. They don't rise because of memes, but because borrowing becomes easier and capital regains confidence.

Therefore, ignoring the Russell index breakout because "it has nothing to do with encryption" would be completely missing the point.

The true meaning of a "supercycle"

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

• Structural support: The rally lasted longer than expected because it was driven by market structure rather than short-lived euphoria.

• Pullbacks are absorbed: Market pullbacks are absorbed by buying pressure and do not escalate into a chain reaction of sharp declines.

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

• High-beta assets are finding a new lease on life: After years of suppression, high-risk, high-return assets have finally gained breathing room and room to rise.

This is precisely the environment in which altcoins have historically stopped "bleeding" and begun to revalue. Not all altcoins will rise, and the rise will not be uniform, but the trend will be decisive.

The signal is already on the table.

The Russell 500 index breaking its all-time high is no accident. Its occurrence is inevitably accompanied by easing liquidity, a return to higher risk tolerance, and renewed capital inflows.

• It did so in 2017.

• It did the same thing in 2021.

• It is doing that now.

You don't need to predict specific target prices, nor do you need to pinpoint the exact timing of rotations. You just need to recognize that when small-cap stocks lead the market, they are telling you what's coming next.

The crypto market has ignored this signal in the past, only to regret it months later.