The cryptocurrency market started 2026 on a solid footing, but the question now is whether the rally can last, cryptocurrency asset management firm Bitwise said in a blog post on Tuesday.
bitcoin and ether Both are up about 7% year-to-date, six days into 2026, with speculative tokens posting even bigger gains. alone is up about 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 be met for cryptocurrencies to advance to new all-time highs this year, and one of them may already be in the rearview mirror.
Hougan noted the absence of another major market shock, such as the liquidation event on October 10, 2025, when approximately $19 billion in crypto futures positions were wiped out in a single day.
In the following months, investors worried that large market makers or hedge funds might be forced to unwind positions, creating persistent selling pressure. Hougan said those fears appear to have allayed, noting that any major liquidation would likely have occurred by the end of the year. The market’s strength in early 2026 suggests investors have overcome that excess.
The next test, Hougan says, is Washington. Proposed legislation on the structure of the US crypto market is moving forward in Congress, with a Senate Banking Committee margin expected in mid-January, although this date needs to be confirmed and is only part of the legislative process that needs to happen.
While disagreements remain around decentralized finance (DeFi) regulation, stablecoin rewards, and political conflicts, Hougan argued that passage of the bill would be a critical milestone.
Without legislation, a future administration could reverse the current relatively pro-crypto regulatory stance. Bitwise characterized the outlook here as cautiously optimistic but unresolved.
Finally, Hougan said that cryptocurrencies need a reasonably stable stock market context. While digital assets are not closely correlated with stocks, a sharp sell-off, on the order of a 20% drop in the S&P 500 index, would likely impact all risk assets in the near term. Prediction markets currently imply low chances of a recession this year and high chances of gains in stocks, but this remains an external risk.
Overall, the cryptocurrency setup remains constructive, with growing institutional adoption, increased use of stablecoins and tokenization, and lagging benefits from a more favorable regulatory environment beginning in early 2025, according to the blog post. If political progress continues and broader markets cooperate, Bitwise believes crypto’s initial momentum in 2026 could prove long-lasting.
Read more: Grayscale Sees Regulation, Not Quantum Fears, Shaping Crypto Markets in 2026
