3 Checkpoints Bitwise CIO Says Must be Cleared for a 2026 Crypto Rally

This article was first published on The Bit Journal.

The 2026 crypto market rally, which began with early strength in major digital assets, is not yet assured to reach new all-time highs, according to Bitwise Chief Investment Officer Matt Hougan.

In a memo titled “Three Checkpoints for a Rally,” Hougan points out three specific obstacles the market needs to cross before it can enjoy a compelling and sustained rally. 

Hougan explains which criteria have been satisfied and which are still outstanding as of the beginning of January 2026.

Checkpoint 1: Preventing More Market Liquidations

The first hurdle sets around systemic stability in the wake of a major liquidation in late 2025. On Oct. 10, 2025, according to the memo from Bitwise, crypto became subject to the largest liquidation event in its history with $19 billion of futures positions liquidated in a single day.

The event raised fears among investors that big market makers or hedge funds could be compelled to wind down positions, which could result in forced sales of assets that deepen the stress.

That danger has passed now, Hougan says. He writes: “The good news: If it were going to happen, it probably would have happened by now.”

The rally seen at the start 2026 is partly because “investors have put October 10 in the rearview,” he adds. These comments affirm that the immediate risk from the October 2025 liquidation shock has dissipated and provide a sort of baseline green light for early market strength.

This insight explains why markets rebounded since early 2026 following a $1.2T sell-off post October crash. 

While volatility still comes hand in hand with crypto markets, the memo confirms that at least one previous systemic worry that had generally been part of the mix doesn’t manifest itself to dampen sentiment quite as it once did.

Checkpoint 2: The Passage of The CLARITY Act

The second issue has to do with regulatory progress in the U.S. Hougan names the crypto market structure bill dubbed as “CLARITY Act” as one of the significant legislative progress. 

The bill is advancing through Congress, according to the memo, with the Senate targeting January 15 as the markup date, when committees reconcile draft language and move forward the bill for a potential vote.

“Passage of the CLARITY Act is key to the long-term future of crypto in the U.S.” Hougan’s memo reads, noting that without a legislative framework codified into law, the current regulatory orientation of agencies, the current work of agencies such as the SEC and CFTC could be undone. 

The bill’s passage would “lay a strong foundation for future growth,” he says.

The Bitwise memo also cites current impediments to the bill passage, such as competing visions of how to regulate DeFi, stablecoin rewards and political conflicts of interest.

These areas of contention have made negotiations all the more challenging, as committees get ready for markup. And while the memo emphasizes the bill’s significance, it doesn’t say that the passage is a sure thing, only that advancing out of markup would be an important step.

Check Point Three: Reasonable Conditions on the Stock Market

The third point takes into account the overall equity market. Although crypto is not strongly correlated to equities, substantial stock volatility could influence investor demand for risk assets including crypto. Hougan stresses that connection in the memo, saying that

“a sharp collapse, say 20 percent pullback in the S&P 500, would take the shine off all risk assets in the short term, crypto included.”

Hougan clarifies that he does not claim special expertise on equity markets, but he references indicators showing relatively favorable conditions or perception among market participants that a recession in 2026 is less likely and that there is a strong probability of equity gains.

He writes, in the memo, that prediction markets “currently see a relatively low probability of a recession in 2026 and a roughly 80% probability of S&P 500 gains.”

This checkpoint describes equity stability as a “yellow light”,  something that remains unresolved and has the potential to impact market psychology, but is not an outright barrier in its own right.

The memo does not say that crypto needs a bull move in equities to rise; rather, it simply says that a sharp down move would be bad for all risk assets, including crypto.

Three Checkpoints Tasks Combined Effects

Collectively, those three checkpoints: systemic stability, regulatory clarity and equity market conditions, offer a framework for understanding whether crypto’s early 2026 gains can be sustained.

In the memo’s conclusion, Hougan states:

“There is a lot to like in the crypto market right now. Institutional adoption is growing, real-world use cases like stablecoins and tokenization continue to surge, and we’re just starting to feel the benefits of the pro-crypto regulatory push that started in January 2025.”

He continues: “If we meet the three goals above, I believe early momentum in 2026 will have some serious legs.”

This clarification emphasizes that much has been achieved and especially at the first of these markers, but with regard to the others, they are all externalities which are not yet certain and could make or break sentiment.

Conclusion

The Bitwise CIO memo 3 checkpoints for a rally establishes a clear, fact-based framework for what the crypto market must clear to sustain its early gains in 2026. 

The market has already cleared the initial hurdle of dodging additional market-wide blowups for now, and investors can focus beyond the October 2025 liquidation event at last, according to the memo.

Two hurdles are still to be cleared: getting the CLARITY Act through legislative process in the U.S. and an equity market environment that is not too roiled. They are described as 2 necessary conditions that might foster deeper market confidence and assist in unlocking wider participation.

This structured approach from the CIO of one of the larger asset managers offers a non-speculative way to think about where crypto stands in early 2026. The memo does not make predictions, but it lists specific events whose results are likely to determine the course markets will take over the new year.

Glossary

Crypto Rally: A consistent increase in the overall value of cryptocurrency markets.

Liquidation event: A quick closing of leveraged trading positions, typically leading to sharp price moves.

CLARITY Act: A suggested U.S. federal bill designed to add clarity to market structure and the regulation of digital assets.

Markup (legislative): The process in committee of reviewing and amending a bill before it is reported.

Stock market: The financial markets in which stocks and other equity securities are traded.

FAQs About Bitwise 2026 Crypto Rally Checkpoints

What’s the first milestone Bitwise claims crypto markets surpass?

According to Matt Hougan, the lack of another market blowup like the October 10, 2025 liquidation event is seen a major obstacle that has already been crossed.

What Does the CLARITY Act Mean for Crypto?

The memo says the CLARITY Act would codify principles into law that would create a clear path to future growth and minimize regulatory risk of reversal.

Does crypto depend on a stock market rally to thrive?

No. Crypto does not need a buoyant equity market, the memo explains, but a sharp selloff in equities could hurt assets overall, including crypto.

Is the CLARITY Act guaranteed to pass?

No. The memo notes that mark up and political arguments continue, and passage is not guaranteed, .

Reference

Bitwise Investments Experts