The crypto market has started 2026 on a solid 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 around 7% year-to-date, six days into 2026, with speculative tokens posting even bigger gains. alone is up around 29%, a sign that risk appetite has returned to parts of the market.
Bitwise CIO Matt Hougan said there are three key conditions that must hold for crypto to push toward new record highs this year, and one of them may already be in the rearview mirror.
Hougan pointed to the absence of another major market shock such as the October 10, 2025 liquidation event, where around $19 billion in crypto futures positions were wiped out in a single day.
In the months that followed, investors worried that major market makers or hedge funds might be forced to liquidate positions and create sustained selling pressure. Hougan said those fears appear to have subsided, noting that any major cuts would likely have happened by the end of the year. The market’s strength in early 2026 suggests that investors have moved past this overhang.
The next test, Hougan says, is Washington. The proposed US crypto market structure legislation is moving through Congress, with a Senate Banking Committee markup targeted for mid-January, though that date needs to be confirmed and is just one part of the legislative process that needs to happen.
While there are still disagreements over decentralized financial regulation (DeFi), stablecoin rewards and political conflicts, Hougan argued that the passage of the bill would be a critical milestone.
Without legislation, today’s relatively pro-crypto regulatory stance could be reversed by a future administration. Bitwise characterized the outlook here as cautiously optimistic but unclear.
Finally, Hougan said that crypto needs a reasonably stable stock market background. While digital assets are not closely correlated with stocks, a sharp selloff, on the order of a 20% drop in the S&P 500 index, is likely to weigh on all risk assets in the near term. Prediction markets currently imply low odds of a recession this year and high chances of equity gains, but this remains an external risk.
Overall, the setup for crypto remains constructive with increasing institutional adoption, increasing use of stablecoins and tokenization, and the delayed benefits of a more supportive regulatory environment beginning in early 2025, the blog post said. If policy progress continues and broader markets cooperate, Bitwise believes crypto’s early momentum in 2026 could prove sustainable.
Read more: Grayscale sees regulation, not quant fears, shaping crypto markets in 2026
