The cryptocurrency market has kicked off 2026 on a strong note, yet the pressing question is whether this rally is sustainable, according to a blog post from crypto asset management firm Bitwise on Tuesday.
Bitcoin and ether have both seen an approximate 7% increase year-to-date, just six days into 2026, with speculative tokens enjoying even higher rises. alone has surged approximately 29%, indicating a resurgence in risk appetite within certain market segments.
Bitwise CIO Matt Hougan highlighted three essential conditions that must be met for crypto to reach new all-time highs this year, noting that one may have already passed.
Hougan referred to the lack of a significant market disruption like the catastrophic liquidation event on October 10, 2025, which saw about $19 billion in crypto futures wiped out in just 24 hours.
In the subsequent months, there were concerns that large market makers or hedge funds might be compelled to liquidate positions, creating ongoing selling pressure. Hougan observed that these anxieties seem to have dissipated, mentioning that any substantial unwinding likely would have taken place by year-end. The early strength in the 2026 market indicates that investors may have moved beyond that concern.
The next challenge, according to Hougan, is Washington. Proposed legislation concerning U.S. crypto market structure is currently making its way through Congress, with a Senate Banking Committee markup set for mid-January, although this timing is subject to confirmation and is just one aspect of the legislative process that needs to occur.
Despite remaining issues surrounding decentralized finance (DeFi) regulations, stablecoin incentives, and political discord, Hougan posited that the passage of the bill would represent a significant milestone.
In the absence of legislation, the current relatively pro-crypto regulatory stance could be reversed by a future administration. Bitwise described the outlook as cautiously optimistic but unresolved.
Lastly, Hougan stated that a relatively stable equity market environment is essential for crypto. Although digital assets are not closely linked to stocks, a drastic selloff, such as a 20% drop in the S&P 500 index, would likely impact all risk assets in the short term. Current prediction markets suggest low chances of a recession this year and strong potential for equity gains, but this remains a notable external risk.
In summary, the conditions for crypto appear favorable, bolstered by increasing institutional adoption, rising stablecoin utilization and tokenization, along with the delayed benefits of a more favorable regulatory landscape that initiated in early 2025, as stated in the blog post. If policy advancements persist and broader markets align positively, Bitwise believes the momentum seen in crypto at the beginning of 2026 could be sustainable.
Read more: Grayscale sees regulation, not quantum fears, shaping crypto markets in 2026
