The cryptocurrency market saw a brief rise recently but has become more volatile again, with Bitcoin and other major assets giving back some of their earlier weekly gains. Amid this shifting environment, Matt Hougan, Chief Investment Officer at Bitwise, has identified three key “checkpoints for a rally” that he believes are necessary for a lasting crypto recovery this year.
In a report released on January 6, Hougan pointed to the first hurdle: avoiding a repeat of the catastrophic events of October 10, 2025. That day saw the largest liquidation event in market history, wiping out roughly $19 billion in futures positions within 24 hours.
The fallout raised investor concerns about the long-term health of major market players like hedge funds and market makers, with fears they might need to sell assets to stabilize their operations—a move that could pressure the market. However, Hougan expressed some optimism, suggesting that if a major firm were going to fail, it likely would have happened by now. He believes investors are starting to move past the trauma of October 10, which has contributed to the recent rally at the start of the year.
The second checkpoint is the passage of the crypto market structure bill, known as the CLARITY Act, which is advancing through Congress with a key markup expected on January 15. This process involves reconciling different drafts from the Senate banking and agriculture committees ahead of a final vote. However, as NewsBTC reported on Wednesday, several obstacles remain, including differing views on how to regulate decentralized finance (DeFi) and stablecoin rewards.
Hougan stressed that approving the CLARITY Act is essential for the long-term viability of cryptocurrencies in the United States. Without a legislative framework, he warned that the current pro-crypto stance at regulatory agencies could change sharply under future administrations. Passing the bill would cement key regulatory principles into law, providing a solid foundation for the sector’s continued growth.
The final hurdle for a sustained rally is stability in the broader equity market. While cryptocurrencies don’t move in lockstep with stocks, a major downturn—such as a 20% drop in the S&P 500—could cool enthusiasm for all risk assets, including digital currencies. Hougan also noted growing concerns about a potential AI bubble. Still, current prediction markets indicate a low probability of a recession in 2026 and about an 80% chance of gains for the S&P 500.
Frequently Asked Questions
Of course Here is a list of FAQs about the three key factors for a sustained crypto rally in 2026 as outlined by Bitwises Chief Investment Officer Matt Hougan
Beginner General Questions
1 Who is Matt Hougan and why should I care about his prediction
Matt Hougan is the Chief Investment Officer of Bitwise Asset Management one of the largest and most respected crypto asset managers His analysis is based on deep market research and institutional data making his outlook influential for many investors
2 What are the three key factors for a crypto rally in 2026
According to Hougan the three key factors are
1 The maturation of crypto ETFs
2 The resolution of current regulatory uncertainties in the US
3 The emergence of new killer decentralized applications that attract millions of users
3 Why 2026 Why not sooner
Hougan believes these are structural foundational changes that take time Regulatory clarity the launch and growth of new ETFs and the development of major new applications are multiyear processes that he expects to converge around 2026
4 Whats a crypto ETF and how does it help
An ETF is a traditional investment product that trades on stock exchanges A Bitcoin ETF lets people buy exposure to Bitcoin through their regular brokerage account This makes investing much easier and safer for the average person and big institutions bringing massive new capital into crypto
Intermediate Advanced Questions
5 What does maturation of crypto ETFs mean beyond the current Bitcoin ETFs
It means the potential approval and successful launch of Ethereum ETFs and possibly ETFs for other major crypto assets It also refers to these products gaining significant assets developing robust trading volumes and becoming standard holdings in diversified investment portfolios
6 What specific regulatory uncertainties need to be resolved
The main issue is the lack of clear rules for what constitutes a security versus a commodity in crypto The ongoing lawsuits between the SEC and major crypto companies create a cloud of uncertainty that discourages institutional builders and investors Clear legislation or definitive court rulings would remove this barrier