DAT companies included in the Russell Index can't save Ethereum either

Original author: Eric, Foresight News

This week, FTSE Russell announced the preliminary constituent list for the 2026 Russell 3000 Index. Several crypto-related stocks have been newly added to the index this year, including CoreWeave (CRWV), Iren Limited (IREN), and Galaxy Digital Holdings (GLXY).

Additionally, Ethereum DAT companies BitMine (BMNR) and Sharplink (SBET), as well as Solana DAT company Forward Industries (FWDI), are also on the list. Barring any unexpected developments before June 29, the hundreds of billions of dollars in passive funds tracking the Russell indices will be forced to allocate to these assets, regardless of individual fund managers' personal views on cryptocurrencies.

This is undoubtedly good news for investors in crypto-related stocks, but it is difficult to say the same for cryptocurrencies themselves.

What is the Russell Index?

The Russell Index system, managed by FTSE Russell under the London Stock Exchange Group, is one of the most influential benchmarks for US equities globally. The Russell 3000 Index covers the 3,000 largest publicly traded companies in the US by market capitalization, representing approximately 98% of the investable US stock market. Two core sub-indices derived from it, the Russell 1000 (large-cap, top 1000 companies) and the Russell 2000 (small-cap, next 2000 companies), are also important components of the capital market.

Each June, FTSE Russell conducts a comprehensive reconstitution based on market capitalization data from the end of April. Starting in 2026, this frequency will increase to twice a year (June and November) to reflect market changes more quickly.

As of 2026, approximately $20 trillion in assets are benchmarked to FTSE Russell indices, with the Russell US Index system alone accounting for about $10.6 trillion of that capital. This means that any company added to the Russell Index immediately becomes a target for substantial passive capital allocation.

The capital tracking the Russell indices primarily comes from two types of products: ETFs and index funds. Taking the Russell 2000 as an example, the largest tracking vehicle is BlackRock's iShares Russell 2000 ETF (IWM), with assets under management of approximately $75 billion and daily trading volume exceeding 26 million shares, making it one of the most liquid small-cap ETFs globally. The second is the Vanguard Russell 2000 ETF (VTWO), managing about $13.6 billion in assets with an expense ratio of just 0.07%, making it a preferred choice for long-term passive investors. Other products include Vanguard's Russell 2000 Index mutual fund (VRTIX) and numerous institutional products from BlackRock's Russell 2000 Index fund.

These funds are managed "passively": their sole objective is to replicate the index's performance as precisely as possible, not to actively select stocks. Therefore, when a stock is added to the index, these funds must buy it according to its weight after the reconstitution takes effect. Conversely, delisted stocks are forcibly sold. This mechanism makes the Russell Index reconstitution day (typically the last Friday of June) one of the highest volume trading days for US stocks throughout the year. On the 2024 reconstitution day, the closing volume reached a record of nearly $220 billion.

Historical data shows that companies added to the Russell Index typically experience significant price volatility around the reconstitution date. According to multiple studies, newly added Russell 2000 companies can see an average short-term price increase of 5% to 10% following the effective reconstitution date, driven entirely by forced buying from passive funds. For smaller market cap, less liquid crypto-related stocks like BitMine, this effect could be even more pronounced.

For DAT companies, the price increase triggered by passive buying makes it more favorable to conduct secondary offerings to purchase more cryptocurrencies. If inclusion in the Russell Index is confirmed, the "flywheel" effect that once relied on market hype can now be achieved through the leverage provided by passive funds.

DAT Company Stocks Benefit, ETH Itself May Not

Just days before the Russell Index list announcement, Bankless co-founder and one of the most influential voices in the Ethereum community, David Hoffman, liquidated his entire ETH position.

Hoffman's explanation was not due to a bearish view on the Ethereum network itself. On the contrary, he stated he is "extremely bullish on the future of the Ethereum network." The issue lies with the core narrative that "ETH is money." In Hoffman's view, Ethereum is fundamentally a "giver, not a taker." It provides the most secure blockspace to the world at cost, tokenizes global assets at cost, and secures billions of dollars in DeFi protocols at cost. "Charging no fees for any transactions" is the essence of open-source software and the source of Ethereum's power, but it paradoxically contradicts the logic of "token value appreciation."

Hoffman stated bluntly that Ethereum is the most successful non-profit organization in human history, but architecturally, Ethereum does not prioritize ETH. He argues this is not a flaw but a feature. He believes that only a small fraction of the network's and its ecosystem's success is reflected in ETH's price. The application layer and L2 services are capturing most of the value. The rollup-centric roadmap means L2s capture 97% of the profits, while ETH receives a minimal share.

This reveals a structural dilemma. DAT companies can achieve independent valuation appreciation through the rules of the traditional financial system (index inclusion, institutional allocation, stock premiums), potentially even trading at a premium relative to the crypto assets they hold. However, when these companies raise capital in the secondary market, the funds do not flow directly to ETH itself.

Given the relatively small market capitalization of DAT companies, the amount of capital inflow from passive allocation will likely be quite limited, and the extent of stock price appreciation may be minimal. On the other hand, both Ethereum and Solana are currently facing challenges with their token prices. Buying pressure from DAT companies might offset some selling pressure, but it cannot resolve the fundamental issue of the market's inability to assign higher valuations to layer-1 blockchains.

In August 2025, Ethereum hit an all-time high near $5,000, while currently, its price is around $2,000. During the nine months of a nearly 60% price decline, one company, BitMine, alone purchased 3.6 to 3.7 million ETH, yet this failed to halt the asset's continuous downward trend.

Conclusion

The Russell Index opening its doors to cryptocurrency companies is undoubtedly another milestone in the convergence of traditional finance and the digital asset world. For companies like CoreWeave, Iren, and Galaxy, this means broader institutional recognition, more stable capital inflows, and higher market liquidity. However, when DAT companies face the same capital inflows, the outcome may not trickle down to benefit the underlying crypto assets.

Currently, the narrative of "ETH is money" is giving way to the reality of "ETH is public infrastructure." The same applies to Solana and a series of other layer-1 blockchains. While rising chain revenues and the prospect of buybacks might temporarily support token prices, this logic has an invisible ceiling. Introducing a new narrative for token value creation is perhaps the most crucial issue to contemplate right now.