Bitwise: The three key factors driving the continued growth of the 2026 crypto market

Article by: Matt Hougan, Chief Investment Officer of Bitwise

Translation by: Saoirse, Foresight News

The cryptocurrency market in 2026 is off to a good start. As of January 5, when I wrote this memo, both Bitcoin and Ethereum have gained 7% since the beginning of the year. Speculative altcoins have performed even better, for example, Dogecoin has surged by 29%.

Can this rally continue?

Throughout the holiday season, I’ve been pondering: what conditions are needed for cryptocurrencies to sustain a rebound in 2026? I believe there are three major obstacles standing in the way of reaching new all-time highs. Fortunately, one of these obstacles has already been overcome.

Obstacle 1: Avoiding a replay of the “10・11” crash

On October 11, 2025, the crypto market experienced the largest liquidation event in history — $19 billion worth of futures positions were wiped out in a single day. After the event, many feared it would hit major market makers and/or hedge funds hard, potentially fatally.

One reason cryptocurrencies struggled to rebound in Q4 2025 was investor concern that one of these large institutions might be forced to cease operations, which would typically involve forced asset sales. These potential sell-offs cast a fog over the market.

The good news is: if such a risk event were to happen, it’s likely it would have already occurred by now. While I can’t guarantee it, any institution planning to shut down would probably complete the process before the end of the year. I believe one reason the market was able to rebound earlier this year is that investors have gradually forgotten the impact of the “10・11 event.”

Obstacle 2: The smooth passage of the CLARITY Act

The so-called CLARITY Act, a legislative framework for the crypto market, is currently under review in the U.S. Congress. The Senate plans to start the “bill revision review” process on January 15, which involves coordinating draft bills from the Senate Banking Committee and the Agriculture Committee, and pushing the final bill toward a vote. There are still some hurdles, such as disagreements over DeFi regulation, stablecoin yield rules, and political conflicts. But as long as the bill passes the revision review stage, it marks a critical step toward final approval.

The passage of the CLARITY Act is vital for the long-term development of the U.S. crypto market. Without relevant legislation, regulatory tendencies supporting crypto development by agencies like the SEC and CFTC could reverse after a new administration takes office. Passing this bill would enshrine core principles of crypto regulation into law, laying a solid foundation for future market growth.

David Sacks, the White House’s crypto affairs coordinator, said, “We are closer than ever to passing the bill.” The prediction platform Kalshi estimates a 46% chance of the bill passing before May, and an 82% chance before the end of the year. I remain cautiously optimistic about this.

Obstacle 3: The stock market remains “reasonably stable”

The final key factor for sustained crypto rally is that the overall stock market remains stable. We don’t need a raging bull market — after all, cryptocurrencies are not highly correlated with stocks. But if the stock market crashes sharply (for example, a 20% drop in the S&P 500), the appeal of all risk assets, including cryptocurrencies, will be significantly diminished in the short term.

I can’t claim to have any special expertise in the stock market. While some worry about a bubble in AI, market forecasts suggest the probability of an economic recession in 2026 is relatively low, and the S&P 500 has about an 80% chance of rising in 2026.

Conclusion

There are many positive factors currently supporting the crypto market: increasing institutional adoption; rising demand for real-world applications like stablecoins and tokenization; and the benefits brought by the regulatory trend supporting crypto development initiated in January 2025, which are gradually becoming apparent. If the three key obstacles outlined above can be addressed, I believe the rally at the beginning of 2026 will have strong momentum to continue.