Why Crypto Market Cap Could Soon Reach a New ATH in Q1

The Russell 2000 index reached a new all-time high in January. This breakout not only reflects the strength of US small-cap stocks but also carries important implications for the cryptocurrency market, especially altcoins.

Meanwhile, other data points indicate improving sentiment among altcoin investors. Market participants are increasingly expecting a recovery during this quarter.

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Strong Correlation Between The Russell 2000 And The Crypto Market

The Russell 2000 tracks around 2,000 small-cap US companies. These stocks represent higher-risk assets within traditional financial markets.

When the index leads the market higher, it often signals that capital is rotating toward riskier assets. Investors tend to accept more risk in pursuit of higher returns.

Hedgeye analysts added that the Russell 2000 has outperformed the S&P 500 for nine consecutive days. This marks the longest such streak since 2017.

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The chart comparing crypto market capitalization with the Russell 2000 highlights a strong alignment over the past two years. Local highs and lows in the index have closely matched peaks and troughs in the crypto market’s total valuation.

As a result, the index reaching a new high raises hopes that the crypto market could also set a new high soon, as investors become more open to risk.

Other analysts have relied on this signal to forecast altcoin gains ranging from 20% to 5x.

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Altcoin Buy/Sell (Long/Short) Ratios Remain Elevated in January

At the same time, most altcoins currently show Buy/Sell (Long/Short) ratios above 1. Data analytics platform Alphractal views this as a sign that long positions are dominating the market.

The chart shows that higher-ranked altcoins, which typically have smaller market capitalizations, tend to exhibit even higher ratios. This pattern suggests that traders are taking on more risk, reflecting growing confidence in an altcoin recovery.

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From a psychological perspective, many altcoins have already declined by 80%–90%. Losses of this magnitude reduce the incentive for underwater holders to sell, leading them to continue holding. Meanwhile, well-capitalized investors often view these levels as attractive buying opportunities.

However, even if an altcoin season emerges, not every token is likely to rally. Analyst CW cited Binance altcoin netflow data from CryptoQuant and warned that while some altcoins are being heavily accumulated, others may face selling pressure.

Altcoins that retain holder confidence and continue to leave exchanges tend to have stronger upside potential. In contrast, tokens that holders keep sending to exchanges for liquidity may struggle to perform as well.