Behind the season of altcoins, global capital is actually slowly flowing towards higher-risk assets, especially small-cap stocks like the Russell 2000. You see, the Russell 2000 set a new high yesterday.

In the past two years of interest rate hikes, the rise of U.S. stocks has mainly relied on a few large stocks, especially Nvidia. Particularly in the late stage of the rate hikes, Nvidia almost single-handedly supported the entire market's upward trend.

During that phase, global capital began to flow towards value stocks, especially tech stocks, while cryptocurrencies like Ethereum and other altcoins plummeted, and small-cap stocks in the U.S. were not spared from this wave of decline. The reason is actually quite simple: the prices of risk assets are closely tied to "cheap capital." When the cost of capital is low, the prices of risk assets can soar. During the massive liquidity injection in 2021, even some junk assets could skyrocket.

But once faced with interest rate hikes and balance sheet reductions, the cost of capital rises, and investors will start to sell off these high-risk assets, turning to value stocks like Nvidia. Nvidia has skyrocketed in the past two years, and everyone is scrambling for it.

Now, the situation is beginning to change. First, the interest rate reduction cycle for U.S. stocks has started; secondly, Trump may return to power, and he supports a low-interest-rate economic environment.

From the trend of U.S. stocks, the situation is indeed changing. Nvidia's rise is starting to lose momentum and cannot rise further. Capital has begun to take profits from these large stocks and flow towards risk assets, with the Russell 2000 setting a new high being the most obvious example.

The altcoin market in cryptocurrencies is highly correlated with the Russell 2000. When investors' risk appetite increases, everyone is willing to speculate on coins.

Currently, the altcoin season is still in its early stages, and a significant wave of increase in Ethereum might be the indicator of a full-fledged start. The key point mentioned by Lao Yu is worth paying attention to: we are currently in the early stage of the altcoin season.

ETH ETFs are beginning to see net inflows, and once ETH has a significant surge, ETF capital might start to flood in, at which point profit-taking capital from Bitcoin, meme coin players, and even investors in the A-shares might turn towards altcoins.

For friends investing in U.S. stocks, you can also refer to the logic I mentioned. If there are no major changes in U.S. monetary policy, the Russell 2000 might welcome a wave of increase.