A sharp equity-market downturn could still derail crypto’s momentum, the report warned.
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 Tuesday.
Bitcoin BTC$92,456.24 and ether ETH$3,239.69 are both up about 7% year-to-date, six days into 2026, with speculative tokens posting even larger gains. DOGE$0.1467 alone is up roughly 29%, a sign that risk appetite has returned to parts of the market.
Bitwise CIO Matt Hougan said there are three key conditions that need to hold for crypto to push toward new all-time highs this year, and one of them may already be in the rearview mirror.
Hougan pointed to the absence of another major market shock like the Oct. 10, 2025 liquidation event, when roughly $19 billion in crypto futures positions were wiped out in a single day.
In the months that followed, 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 eased, noting that any major wind-downs likely would have happened by year-end. The market’s early-2026 strength suggests investors have moved past that overhang.
The next test, Hougan says, is Washington. The proposed U.S. crypto market structure legislation is moving through Congress, with a Senate Banking Committee markup targeted for mid-January,though this date needs to be confirmed, and is just one 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, today’s relatively pro-crypto regulatory stance could be reversed by a future administration. Bitwise characterized the outlook here as cautiously optimistic but unresolved.
Finally, Hougan said crypto needs a reasonably stable equity market backdrop. While digital assets are not tightly correlated with stocks, a sharp selloff, of the order of a 20% decline in the S&P 500 index, would likely weigh on all risk assets in the short term. Prediction markets currently imply low odds of a recession this year and strong chances of equity gains, but this remains an external risk.
Overall, the setup for crypto remains constructive, with growing institutional adoption, rising use of stablecoins and tokenization, and the lagged benefits of a more supportive regulatory environment that began 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 durable.
