Crypto entered 2026 with a sharp bid, and Bitwise CIO Matt Hougan says the next leg is high in three checkpoints that have less to do with chart patterns and more to do with market piping, Washington, and the broader risk environment.
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 moved faster, Dogecoin up 29% over the same window. The question, he said, is whether that initial momentum can turn into something more sustainable than a fleeting January pop.
Three Barriers to Overcoming Bitcoin, ETH and Dogecoin
Hougan’s outline begins with a memory the market would like to bury: on October 10, 2025, when crypto saw what he called “the largest liquidation event in its history,” and “$19 billion in futures positions were liquidated in one day.” The mechanical damage was important, but the mental leap may have been. In the following weeks, he wrote, investors worried that the cascade was “harming the big market makers and/or hedge funds—perhaps fatally,” raising the fury of forced selling as the big players were nowhere to be seen.
“One of the reasons crypto has struggled to rally in Q4 is that investors are concerned that one of these major players may have to cease operations, a process that usually requires a forced sale of assets,” Hougan wrote. “This potential sale hung over the market like a big fog.”
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His first obstacle, then, is the lack of other explosions with similar systemic effects. In that case, he struck a tone with confidence. “The good news: If it was going to happen, it probably would have happened by now,” he wrote, adding that while there is “no guarantee,” a strict shutdown would likely try to “wrap up by the end of the year.” In his reading, part of the first session of 2026 shows the market has “put October 10 in the rear view.” He called that loophole “Green Light.”
The second checkpoint is legal, and much less under market regulation: the passage of the crypto market structure bill known as the CLARITY Act. Hougan wrote that the bill “will go to Congress,” with the Senate “set for January 15 to vote,” which is the stage where committees put together drafts and try to move the final bill to a vote.
He didn’t present it as a pure form of skating. “Obstacles remain,” he wrote, citing “competing ideas on how to regulate DeFi, stablecoin rewards, and political disputes.” Still, he framed the tag as an important gateway: if CLARITY cleared that process, it would be “a big step toward approval.”
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Hougan’s main argument is about resilience. “Passage of the CLARITY Act is key to the long-term future of crypto in the US,” he wrote. “Without legislation, the current pro-crypto regulatory tilt at the SEC, CFTC, and other agencies could reverse under the new administration. Passage of this Act will enshrine important principles in the law and provide a solid foundation for future growth.”
He pointed to signs from both political markets and forecasts. White House crypto chief David Sacks, Hougan wrote, “we are closer than ever” to passing the bill. Kalshi, he added, puts the chances at 46% in May and 82% by the end of the year. Hougan’s own take: “I’m very optimistic.” He marked this loop as “Yellow Light.”
The third test area is one that crypto traders often choose to ignore, until it matters: the stability of the equity market. Hougan said the market doesn’t need a bullish stock market to support crypto, noting that “crypto has little to do with stocks.” But he drew a hard line around drawdowns that forced extensive underwriting and risk-taking. “A sharp decline—say, a 20% drop in the S&P 500—will take the light out of all risk assets in the short term, including crypto,” he wrote.
Here, he was blunt about the limitations: “I can’t claim special expertise in the equity markets.” While noting that some investors are worried about an AI bubble, he pointed to forecast markets that “see a low probability of a recession in 2026 and an almost 80% probability of S&P 500 gains.” As a rule of CLARITY, he labeled the equity background as “Yellow Light.”
Hougan closed by arguing that the setup is constructive if those remaining yellows turn green. “There’s a lot to like in the crypto market right now,” he wrote, pointing to growing institutional adoption, the rise of real-world use cases “such as stablecoins and tokenization,” and a market that is “starting to feel the benefits of the pro-crypto regulatory push that began in January 2025.” If these three steps go well, he added, “the first impulse of 2026 will have serious legs.”
At press time, Bitcoin traded at $91,717.
The featured image was created with DALL.E, a chart from TradingView.com
