Crypto asset management company Bitwise said in a blog post on Tuesday that the crypto market is already on a solid footing at the start of 2026, but the question now is whether the rally can be sustained.
Bitcoin and ether Year-to-date, six days into 2026, both are up about 7%, with the speculative token up even more. It’s only up about 29%, suggesting risk appetite has returned in some markets.
Matt Hougan, chief information officer of Bitwise, said that for cryptocurrencies to push to new all-time highs this year, three key conditions need to be met, one of which may be a thing of the past.
Hougan noted that there has not been another major market shock, such as the liquidation event on October 10, 2025, when approximately $19 billion in cryptocurrency futures positions were wiped out in a single day.
In the coming months, investors worried that large market makers or hedge funds might be forced to liquidate their positions, causing continued selling pressure. Hogan said those concerns appear to have eased, noting that any major shutdowns could occur before the end of the year. The market’s strength in early 2026 suggests investors have gotten over this.
Hogan said the next test is Washington. Proposed U.S. cryptocurrency market structure legislation is before Congress, with the Senate Banking Committee targeting mid-January for a markup, although this date needs to be confirmed and is only part of the legislative process that needs to take place.
While there are still divisions surrounding decentralized finance (DeFi) regulation, stablecoin rewards, and political conflicts, Hougan believes the passage of the bill will be an important milestone.
Without legislation, future governments may reverse the current relatively pro-crypto regulatory stance. Bitwise describes the outlook here as cautiously optimistic, but not yet resolved.
Finally, Hougan said cryptocurrencies need a fairly stable stock market backdrop. Although digital assets are not closely correlated with stocks, a sharp sell-off with the S&P 500 down around 20% could put pressure on all risk assets in the short term. Forecast markets currently suggest a low likelihood of a recession this year and a strong likelihood of a stock market rally, but this remains an external risk.
The blog post stated that overall, the cryptocurrency setup remains constructive, with increasing institutional adoption, increasing use of stablecoins and tokenization, and the lagging benefits of a more supportive regulatory environment starting in early 2025. If policy progress continues and the broader market cooperates, Bitwise believes the cryptocurrency’s early momentum in 2026 could be sustained.
Read more: Grayscale believes regulation, not quantum fear, will shape cryptocurrency markets in 2026
