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Bitwise Chief Investment Officer Matt Hougan says the strength of the 2026 crypto rally hinges on three main checks: avoiding another major market blow up, passing a United States crypto market structure law and keeping equity markets broadly steady, adding that one of those hurdles already appears to be behind investors.
October 2025 Wipeout Now Fading for Investors
In a blog post on Tuesday, Hougan said crypto’s strong start to 2026 comes after the market lived through what he described as its largest ever liquidation event on Oct 10, 2025, when about $19 billion of futures positions were wiped out in a single day.
The October selloff raised fears that major market makers or hedge funds might have suffered lasting damage and could later be forced to unwind positions, putting further pressure on prices. Those concerns weighed on sentiment through the final months of 2025 and made it harder for the market to recover, he said.
Hougan now believes that risk has largely passed. If a large trading firm needed to wind down its business, it would likely have tried to complete the process before the end of the year, he wrote. With that threat fading, he said investors have been more willing to step back into the market at the start of 2026 and he described this first checkpoint as a green light.
Read More: CLARITY Bill Headed to Senate Markup, Aims to ‘Democratize U.S. Economy’
US Market Structure Bill Seen as Key Test
Hougan said the second key factor is whether Congress can pass a comprehensive US market structure bill for digital assets, known as the CLARITY Act.
He argued that passing the CLARITY Act is critical for the long term future of crypto in the United States. Without clear legislation, he said, the current relatively friendly stance could shift under a new administration.
Writing core principles into law would give the industry a more stable foundation for growth, he said, pointing to comments from White House crypto adviser David Sacks, who said the bill is closer than ever to passage, and to prediction market odds that see a rising chance it will be approved by the end of the year.
Crypto Rally Still Leans on Steady Stock Market
The third factor is the broader equity market. Hougan said crypto does not need a roaring stock market to do well and is not tightly tied to daily moves in major indices.
However, a steep selloff, such as a decline of around 20% in the S&P 500, would likely weigh on all risk assets in the short term, including crypto, by hurting sentiment and making investors more cautious.
Despite the remaining risks, Hougan said the overall picture of digital assets is improving, citing rising institutional adoption, growth in real world uses, such as stablecoins and tokenization, and the early impact of what he described as a pro crypto regulatory push that began in early 2025. If the market avoids another shock, lawmakers deliver on regulation and stocks stay broadly intact, he said the early 2026 crypto rally could start to take shape.
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