I want to fit my seat dropper but don't have any internal cable routing on my cotic solaris frame. I thought about popping a 1/8 or 1/4 inch diameter hole at bottom of seat tube and then running cable on the outside of the diagonal.
is there any reason why I shouldn't do this, for instance will it affect the strength of the frame?

Any hole will effect the strength of the frame, the question is will it effect it significantly. I don't know your frame so when you talk about a diagonal I can't picture that. However a hole of that size (smaller the better) close to either the seat or the bottom bracket should be OK, just not in the mid point between the two.

Maybe put up a picture of the frame with proposed hole location indicated.


Edit:

I've had a few moments to think about it, dont do it. If your'e riding hard then a hole is a perfect means of introducing stress fractures to your frame around the hole. NACA did some research on induced stress fractures during WWII and generally speaking there's no easy way to make a hole without risking stress fractures in materials under significant stress, such as a bike frame being ridden hard.

Not to mention that drilling a hole will also invalidated any warranty, as well has have a negative effect on any sort of insurance claim (both physical and property).

Why not give Cy a mail to ask what their opinion is on this https://www.cotic.co.uk/contact/