Ethereum Moves with The Business Cycle and Small Cap Stocks

There's still hope for Ethereum and Altcoins into 2026

Why Altcoins Never Caught the Bull: The Missing Piece in the Crypto Cycle

Bitcoin, gold, and the S&P 500 (SPY) have long proven their close relationship with M2 money supply — when liquidity expands, they rise.

But Ethereum and the broader altcoin market play by a slightly different rulebook. They don’t just need liquidity… they need optimism.

Specifically, expanding small-cap stocks and a strong business sentiment environment.
Higher-risk assets — from growth stocks to altcoins — thrive when the economy believes in itself. And throughout this entire crypto cycle, that optimism never fully materialized.

Despite strong narratives, legal wins, and technological progress, altcoin expansions never sustained. Why? Because the business cycle is the true king of risk-taking.

🧭 Where to Watch: IWM & PMI

Two of the best gauges for this optimism are:

IWM (Russell 2000) – tracks small-cap stocks and risk appetite

ISM PMI – measures manufacturing activity and future order expectations

When the PMI is above 52, the economy is in expansion mode — and that’s historically when IWM hits new highs.

Interestingly, Ethereum has mirrored IWM’s trend, even showing outperformance when IWM pushes into all-time highs. That means ETH’s bullish potential could be closely tied to the next leg of small-cap and business expansion.

💡 The Takeaway

In the past, money supply (M2) and business optimism rose together.
Now, they’ve decoupled — giving us a clearer way to separate which catalyst drives which asset.

So, the big question:
👉 If business sentiment improves in 2026… does Ethereum finally get its real bull run?

Only time — and the next PMI reading — will tell.