The crypto market started 2026 on strong footing, but the question now is whether the rally can last, crypto asset management firm Bitwise said in a blog post on Tuesday.
Bitcoin and ether are both up about 7% year-to-date, six days into 2026, with speculative tokens posting even bigger gains. It alone rose about 29%, a sign that risk appetite has returned in some parts of the market.
Matt Hougan, CIO of Bitwise, said three key conditions must be met for crypto to reach new all-time highs this year, and one of them may already be in the rearview mirror.
Hougan highlighted the absence of another major market shock like the liquidation event of October 10, 2025, when approximately $19 billion in crypto futures positions were wiped out in a single day.
In the months that followed, investors feared that large market makers or hedge funds would be forced to liquidate their positions, creating persistent selling pressure. Hougan said those fears appear to have subsided, noting that any major selloff would likely have occurred by the end of the year. Market strength in early 2026 suggests investors have overcome this overhang.
According to Hougan, the next test will be Washington. The U.S. Crypto Market Structure Bill is currently working its way through Congress, with a Senate Banking Committee markup scheduled for mid-January, although that date needs to be confirmed and is only part of the legislative process that must take place.
Although disagreements remain regarding decentralized finance (DeFi) regulation, stablecoin rewards, and political conflicts, Hougan argued that passing the bill would be a crucial step.
Without legislation, the current relatively pro-crypto regulatory stance could be reversed by a future administration. Bitwise called the outlook here cautiously optimistic but unresolved.
Finally, Hougan said crypto needs a reasonably stable stock market backdrop. Even though digital assets are not closely correlated to stocks, a sharp selloff, on the order of a 20% drop in the S&P 500, would likely weigh on all risk assets in the near term. Market forecasts currently imply low probabilities of recession this year and high chances of stock market gains, but this remains an external risk.
Overall, the crypto setup remains constructive, with growing institutional adoption, growing use of stablecoins and tokenization, and the lagged benefits of a more favorable regulatory environment that began in early 2025, the blog says. If policy progress continues and broader markets cooperate, Bitwise believes that crypto’s initial momentum in 2026 could prove sustainable.
Learn more: Grayscale sees regulation, not quantum fears, shaping crypto markets in 2026
