The Federal Reserve will begin purchasing Treasury bills later Friday, starting with $8.2 billion as part of its reserve management program, providing a fresh liquidity boost to U.S. money markets.
Small-Caps Soar While Bitcoin Trails
For the first time in five years, the Russell 2000 Index (IWM) has hit record highs, yet Bitcoin (BTC $90,258) remains roughly 27% below its October peak, decoupling from its usual alignment with small-cap equities. Historically, rallies in the Russell 2000 have coincided with Bitcoin surges—most notably in November 2021 when BTC peaked at $69,000, in early November 2024 above $90,000, and mid-October at $126,000. Both assets bottomed on Nov. 21.
Thursday also saw record highs in larger-cap benchmarks such as the Dow Jones Industrial Average and S&P 500, while the Nasdaq 100 trades just below its all-time high. Metals, led by silver, are similarly reaching peak levels.
Rate Cuts and Small-Cap Sensitivity
Smaller, riskier companies are generally more sensitive to interest-rate changes than large-cap stocks. Following the Fed’s 25-basis-point cut on Wednesday, this sensitivity is particularly relevant. Expectations for 2026 Russell 2000 earnings-per-share growth are exceptionally strong at around 49%, according to Goldman Sachs.
Markets are pricing in another 50 basis points of potential rate cuts over the next 12 months, according to the CME Fed Watch Tool, which could further support risk assets, including cryptocurrencies.
Treasury Bill Purchases and Liquidity
The Fed’s Treasury bill program begins Friday with $8.2 billion, part of a broader $40 billion plan running from Dec. 12, alongside reinvestments of maturing agency securities. The renewed liquidity injection is expected to bolster money markets and provide additional support for equities and crypto.
With small-cap stocks surging and fresh monetary support in play, analysts suggest Bitcoin and other cryptocurrencies could soon catch up, narrowing the gap with record-setting U.S. equities
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