Crypto entered 2026 with a pointy bid, and Bitwise CIO Matt Hougan says the following leg larger hinges on three checkpoints which have much less to do with chart patterns and extra to do with market plumbing, Washington, and the broader threat backdrop.
In a January 6 memo, Hougan wrote that Bitcoin and Ethereum have been every up 7% year-to-date as of Monday, January 5, whereas higher-beta names had moved sooner, Dogecoin was up 29% over the identical window. The query, he argued, is whether or not that early power can flip into one thing sustained relatively than a fleeting January pop.
Three Hurdles To Overcome For Bitcoin, ETH And Dogecoin
Hougan’s framework begins with a reminiscence the market would relatively bury: October 10, 2025, when crypto noticed what he known as “the biggest liquidation occasion in its historical past,” with “$19 billion in futures positions worn out in a single day.” The mechanical harm mattered, however the psychological overhang could have mattered extra. Within the weeks that adopted, he wrote, buyers frightened the cascade had “impaired main market makers and/or hedge funds—maybe fatally,” elevating the specter of compelled promoting as giant gamers unwound.
“One of many causes crypto struggled to rally in This autumn was that buyers frightened one in every of these large gamers may need to wind down operations, a course of that usually requires the compelled sale of property,” Hougan wrote. “These potential gross sales hung over the market like a heavy fog.”
Associated Studying
His first hurdle, then, is just the absence of one other blow-up with comparable systemic implications. On that entrance, he struck a notably assured tone. “The excellent news: If it have been going to occur, it most likely would have occurred by now,” he wrote, including that whereas “there’s no assure,” a agency shutting down would probably have tried “to wrap up by yr’s finish.” In his learn, a part of the early-2026 rally displays a market that has “put October 10 within the rearview.” He labeled that hurdle a “Inexperienced Gentle.”
The second checkpoint is legislative, and much much less throughout the market’s management: passage of the crypto market construction invoice referred to as the CLARITY Act. Hougan wrote the invoice is “winding its approach via Congress,” with the Senate “concentrating on January 15 for markup,” the stage the place committees align drafts and attempt to transfer a closing invoice towards a vote.
He didn’t current it as a clear glide path. “Hurdles stay,” he wrote, citing “competing visions of how you can regulate DeFi, stablecoin rewards, and political conflicts of curiosity.” Nonetheless, he framed markup as a pivotal gate: if CLARITY clears that course of, it could be “an enormous step towards approval.”
Associated Studying
Hougan’s core argument is about sturdiness. “Passage of the CLARITY Act is vital to the long-term way forward for crypto within the U.S.,” he wrote. “With out laws, the present pro-crypto regulatory tilt on the SEC, CFTC, and different companies may reverse below a brand new administration. Passage of the Act would enshrine core rules into regulation and supply a powerful basis for future development.”
He pointed to indicators from each politics and prediction markets. White Home crypto czar David Sacks, Hougan wrote, says “we’re nearer than ever” to passing the invoice. Kalshi, he added, places the percentages at 46% by Might and 82% by yr’s finish. Hougan’s personal takeaway: “I’m cautiously optimistic.” He tagged this hurdle “Yellow Gentle.”
The third checkpoint is the one crypto merchants usually favor to dismiss, till it issues: equity-market stability. Hougan argued the market doesn’t want a roaring inventory rally to help crypto, noting “crypto just isn’t extremely correlated with shares.” However he drew a tough line round drawdowns that power broad deleveraging and risk-off positioning. “A pointy collapse—say, a 20% pullback within the S&P 500—would take the shine off of all threat property within the brief time period, crypto included,” he wrote.
Right here, he was specific about limits: “I can’t declare any particular experience on the fairness markets.” Whereas he famous some buyers are frightened about an AI bubble, he pointed to prediction markets that “see a comparatively low likelihood of a recession in 2026 and a roughly 80% likelihood of S&P 500 positive aspects.” Just like the CLARITY Act, he labeled the fairness backdrop a “Yellow Gentle.”
Hougan closed by arguing the setup is constructive if these remaining yellows flip inexperienced. “There’s a lot to love within the crypto market proper now,” he wrote, pointing to rising institutional adoption, surging real-world use instances “like stablecoins and tokenization,” and the market “beginning to really feel the advantages of the pro-crypto regulatory push that began in January 2025.” If the three milestones fall into place, he added, “2026’s early momentum may have some severe legs.”
At press time, Bitcoin traded at $91,717.
Featured picture created with DALL.E, chart from TradingView.com
