For the first time in half a decade, Bitcoin is failing to keep pace with a major rally in U.S. equities. While the Russell 2000 index surged to record highs this week, the world’s largest cryptocurrency remains 27% below its October peak — an unusual decoupling that analysts say may be temporary as macro conditions shift in Bitcoin’s favor.
The divergence stands out because new highs in small-cap stocks and Bitcoin have historically reinforced each other during strong liquidity cycles. With the Federal Reserve easing policy, earnings expectations surging and fresh liquidity entering markets, several strategists argue the setup is forming for Bitcoin to rejoin the broader risk-asset rally.
Small Caps Break Out as Bitcoin Stalls
The Russell 2000 — often viewed as the purest barometer of domestic economic sentiment — climbed to a new all-time high on Thursday, joining the Dow Jones Industrial Average and S&P 500 in marking fresh records. The Nasdaq 100 sits just shy of its peak, and metals markets have surged, with silver leading the advance.
Bitcoin, by contrast, is trading around $92,400, stuck well below its October record near $126,000.
This is a striking reversal from the market behavior seen since 2020, when Bitcoin and the Russell 2000 consistently peaked together. The pattern was clear in:
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Nov. 2021: Bitcoin hit $69,000 as the Russell broke higher.
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Nov. 2024: Both assets rallied into new highs above $90,000.
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Oct. 2025: Bitcoin surged to $126,000 alongside small-cap strength.
“Smaller, riskier companies are far more sensitive to rate cuts than megacaps,” Milk Road Macro noted. “That sensitivity has begun to show — and Bitcoin historically responds to that same macro impulse.”
Rate Cuts and Explosive Earnings Forecasts Lift Small Caps
Fueling the Russell 2000 rally is the Federal Reserve’s 25 basis-point rate cut announced Wednesday — its third reduction of the year — and increasingly optimistic earnings expectations.
Goldman Sachs forecasts 49% earnings-per-share growth for the Russell 2000 in 2026, one of the most aggressive outlooks on record. The CME FedWatch tool shows markets pricing in another 50 basis points of cuts over the next 12 months, a trajectory that historically supports high-beta assets, including cryptocurrencies.
Small caps typically outperform early in easing cycles, as lower funding costs disproportionately benefit companies with high leverage or tight credit conditions. Bitcoin, which behaves like a long-duration risk asset during liquidity expansions, has tended to follow.
If this relationship holds, the current lag may be less a decoupling and more a delay.
Fed Reintroduces Liquidity Through Treasury-Bill Purchases
The liquidity backdrop is improving as well.
On Friday, the Federal Reserve begins $8.2 billion in Treasury-bill purchases, the first operation under a new $40 billion reserve management program running through April. The initiative supplements reinvestments of maturing agency securities and effectively expands liquidity in money markets.
Such programs have historically supported asset prices by easing reserve pressures on banks and enhancing market depth — a dynamic that has been correlated with prior Bitcoin rallies.
Investors Eye a Potential Re-Correlation Into 2026
With small-cap equities surging, metals breaking higher and macro conditions turning more accommodative, Bitcoin now sits as one of the few major risk assets yet to reclaim its highs. Traders say this positioning could create asymmetric upside if the cryptocurrency begins to realign with broader market momentum.
Still, lingering concerns over volatility, post-October drawdown psychology and the need for sustained inflows — particularly through ETFs — remain hurdles.
But if liquidity continues to expand and earnings expectations remain elevated, many analysts expect Bitcoin’s lag to narrow.
For now, the market is watching whether Bitcoin’s historical pattern holds: when small caps break out, the cryptocurrency has almost always followed.
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