Crypto entered 2026 with a sharp bid, and Bitwise CIO Matt Hougan says the next leg higher hinges on three checkpoints that have less to do with chart patterns and more to do with market plumbing, Washington, and the broader risk backdrop. In a January 6 memo, Hougan wrote that Bitcoin and Ethereum were each up 7% year-to-date as of Monday, January 5, while higher-beta names had moved faster, Dogecoin was up 29% over the same window. The question, he argued, is whether that early strength can turn into something sustained rather than a fleeting January pop. Hougan’s framework starts with a memory the market would rather bury: October 10, 2025, when crypto saw what he called “the largest liquidation event in its history,” with “$19 billion in futures positions wiped out in a single day.”
The mechanical damage mattered, but the psychological overhang may have mattered more. In the weeks that followed, he wrote, investors worried the cascade had ‘impaired major market makers and—perhaps fatally—,’ raising the specter of forced selling as large players unwound. ‘One of the reasons crypto struggled to rally in Q4 was that investors worried one of these big players might have to wind down operations, a process that typically requires the forced sale of assets,’ Hougan wrote. ‘These potential sales hung over the market like a heavy fog.’
His first hurdle, then, is simply the absence of another blow-up with similar systemic implications. On that front, he struck a notably confident tone, writing, ‘The good news: If it were going to happen, it probably would have happened by now,’ adding that while ‘there’s no guarantee,’ a firm shutting down would likely have tried ‘to wrap up by year’s end.’ In his read, part of the early-2026 rally reflects a market that has ‘put October 10 in the rearview,’ and he labeled that hurdle a ‘Green Light.’
The second checkpoint is legislative, and far less within the market’s control: passage of the crypto market structure bill known as the CLARITY Act. Hougan wrote the bill is ‘winding its way through Congress,’ with the Senate ‘targeting January 15 for markup,’ the stage where committees align drafts and try to move a final bill toward a vote. He did not present it as a clean glide path, noting ‘Hurdles remain,’ citing ‘competing visions of how to regulate DeFi, stablecoin rewards, and political conflicts of interest.’ The third checkpoint is equity-market stability, where a sharp 20% pullback in the S&P 500 could derail gains, even as prediction markets show a relatively low probability of a recession in 2026 and about an 80% probability of S&P gains.
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