Crypto markets have started 2026 with robust gains across major assets, but asset manager Bitwise warns that the rally's sustainability hinges on three key conditions. According to a report by Bitwise Chief Investment Officer Matt Hougan, Bitcoin (BTC) has risen 7% year-to-date, crossing the $91,000 mark to reach $91,409.17 by January 6. Ethereum (ETH) mirrored this performance with a 7% gain, trading above $3,100 at $3,166.74.
The first condition involves overcoming the fallout from the historic liquidation event on October 10, 2025, which wiped out nearly $19 billion in crypto futures in a single day. Hougan stated that fears of forced selling by damaged market makers or hedge funds "hung over the market like a heavy fog" in Q4 2025. The absence of further large-scale liquidations entering 2026 is seen as encouraging, suggesting the necessary unwinding likely occurred before year-end and easing near-term systemic risk concerns.
The second critical hurdle is regulatory progress. Hougan emphasized the importance of the proposed crypto market structure bill, known as the CLARITY Act, moving through the U.S. Congress. The Senate Banking Committee is targeting a markup around mid-January. Passage of this bill is deemed crucial for long-term U.S. crypto adoption, as it would enshrine regulatory principles into law and protect against future policy reversals. White House crypto czar David Sacks noted the industry is "closer than ever" to passing the bill, with prediction market Kalshi giving it a 46% chance by May and 82% by year-end 2026.
The third condition is stability in traditional equity markets. Hougan noted that while crypto doesn't require a raging bull market in stocks, it must avoid a sharp decline. "A 20% drop in the S&P 500 would likely weigh on all risk assets," he said. Current prediction markets see a low probability of a 2026 recession and an approximately 80% chance of S&P 500 gains, providing a supportive backdrop.
The report also highlighted a surge in speculative assets, with Dogecoin (DOGE) gaining roughly 29% in early 2026, signaling spreading risk appetite. Despite the optimistic framework, some analysts express caution. Pseudonymous analyst Doctor Profit maintains a bearish outlook on Bitcoin, expecting a short-term rally toward $97,000-$107,000 but ultimately targeting prices below $70,000 in the coming months, asserting that BTC has not completed its bottoming process.
