Tom Lee Sees Russell 2000 Coiled Spring With Shorts at 99.8th Percentile

Shorts at the 99.8th Percentile

Tom Lee, chairman of Bitmine Immersion Technologies, the company that controls 4.9% of all Ether with holdings above 6 million ETH, says U.S. small-cap stocks are significantly undervalued. In an October note from his research firm Fundstrat, Lee frames the Russell 2000 ETF as a “coiled spring” for October 2026, and the positioning data behind the call is extreme by any historical standard. JPMorgan Equity Strategy figures show short positions against Russell 2000 companies surged to the 99.8th percentile, meaning fewer than 0.2% of comparable historical readings have ever been this bearish. Median short interest exceeded 8% of shares outstanding, an unusually heavy borrowed-share bet against the index's smallest constituents. That concentration of bearish bets, the kind of open interest extreme derivatives desks watch for forced unwinds, is the classic short squeeze setup: traders who sold borrowed shares must buy them back, and a rising tape turns that covering into a cascade that drives prices sharply higher. A percentile reading this high leaves little room for shorts to add, which is why the note treats the setup itself, rather than the index's direction, as the anomaly. The rate path sits at the center of why Lee expects the spring to release now. Fundstrat forecasts that softer U.S. labor market data will ease hawkish pressure from the Federal Reserve, and that the 10-year Treasury yield will fall below 5%. In the firm's model, lower Treasury yields restart risk-on mode automatically, and the freed-up liquidity flows first into Russell 2000 stocks. From there it reaches low-cap crypto assets and undervalued altcoins, which have spent recent months starved of attention while Bitcoin dominated the market. The historical pattern Lee cites is specific: a turnaround in small businesses has served as a leading indicator for rallies in low-cap crypto assets.

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Bitmine's Ether Stake and the S&P Target

Bitmine's position gives the small-cap call an unusual crypto dimension. The company is the largest institutional staker of Ether, and its treasury of more than 6 million ETH represents roughly 4.9% of the asset's total supply. Staking those holdings means Bitmine's returns compound inside the network itself, making the firm a proxy for how far institutional Ether demand has come. Lee chairs its board, so his public equity view and the firm's digital-asset exposure now point the same direction: toward risk assets at the bottom of their valuation range. For the crypto industry, the Russell 2000 thesis reads as preparation for a global liquidity shift rather than a simple stock call. Fundstrat's sequence has the liquidity leaving Treasuries first, hitting small-cap constituents next, and reaching small-cap crypto tokens last, the segment that suffered most from Bitcoin's dominance of flows in recent months. A squeeze in equities and a revival in thin token markets share the same trigger, which is why the note treats them as one trade rather than two. The broader equity backdrop supports the thesis. Fundstrat is maintaining its annual S&P 500 target of 8,200 to 8,400 points despite localized pressure from the U.S. midterm elections. Business fundamentals remain strong: third-quarter earnings per share growth is approaching 30%, a pace that has pulled valuation multiples lower relative to market cap and left room for expansion once sentiment turns. Lee's strategic bet, in his own framing, is that while Ethereum and other major digital assets pass through a prolonged consolidation phase, smart money is hunting the highest returns at the bottom of the traditional market. He treats that accumulation as groundwork for a near-term “altcoin season,” with small caps acting as the transmission channel between Treasury yields and token prices.

The 5% Yield Level That Matters

The release at the center of this call is Fundstrat's own investor note, dated October 2026, and one figure does the work: shorts at the 99.8th percentile. COINOTAG's reading is that the scored level carrying the most weight sits not on the index but on the rate path: the 10-year Treasury yield below 5%, the threshold Fundstrat sets for risk-on mode to restart. If labor data softens and that threshold breaks, the transmission runs from small caps into low-cap tokens. If it holds, the coiled spring stays coiled, and the 8% median short interest keeps the squeeze threat alive on its own.