Bitcoin, ETH, Dogecoin Rally Faces 3 Key Checkpoints: Bitwise CIO

Overview

As the cryptocurrency market entered 2026, it experienced a notable upward trend. Bitwise Chief Investment Officer Matt Hougan outlined three critical checkpoints that could determine whether this rally, particularly for Bitcoin and Ethereum, will be sustained or merely a temporary surge.

Current Market Status

As of early January, both Bitcoin and Ethereum had seen a year-to-date increase of 7%. Meanwhile, Dogecoin, a higher-beta asset, experienced a more substantial rise of 29% during the same period. Despite this positive momentum, Hougan expressed concerns regarding the sustainability of this growth, particularly in light of past market events.

Three Hurdles to Overcome

1. Avoiding Systemic Crises

Hougan emphasized the importance of avoiding another significant market event akin to the one on October 10, 2025, which he characterized as the largest liquidation event in cryptocurrency history. On that day, an estimated $19 billion in futures positions were liquidated, causing considerable mechanical and psychological damage to the market. This event led to fears among investors that major market makers or hedge funds could face operational wind-downs, which would likely trigger forced asset sales. The lingering effects of this incident contributed to the struggles seen in the cryptocurrency market during the fourth quarter of 2025.

However, Hougan noted a sense of confidence regarding the absence of another major blow-up, indicating that if such an event were imminent, it likely would have already occurred. He suggested that the early 2026 rally reflects a market that has moved past the October crisis, dubbing this checkpoint as a “Green Light.”

2. Legislative Progress on the CLARITY Act

The second checkpoint involves the legislative process concerning the CLARITY Act, a proposed framework for cryptocurrency market structure currently under consideration in Congress. Hougan mentioned that the Senate is aiming for a markup of the bill by January 15, a crucial stage where committees refine drafts and work toward a vote. The path to passage is not straightforward, with competing regulatory visions and political conflicts potentially posing challenges. Nevertheless, Hougan framed the successful markup of the CLARITY Act as a significant step toward eventual approval, labeling this checkpoint a “Yellow Light.”

He stressed that the passage of the CLARITY Act is vital for the long-term future of cryptocurrency in the U.S. Without such legislation, the favorable regulatory environment could be reversed, posing risks to future growth. Hougan expressed cautious optimism regarding the bill’s prospects, citing supportive signals from political figures and prediction markets regarding its likelihood of passage.

3. Equity Market Stability

The third checkpoint concerns the stability of the equity markets. Hougan articulated that while a booming stock market is not a prerequisite for cryptocurrency growth, significant downturns could negatively impact risk assets, including cryptocurrencies. He warned that a sharp decline, such as a 20% drop in the S&P 500, could dampen the overall market sentiment for risk assets, including cryptocurrencies.

Despite some concerns about potential equity market bubbles, prediction markets indicate a low probability of recession in 2026 and a high likelihood of S&P 500 gains. This backdrop was also categorized as a “Yellow Light” by Hougan.

From Author

The cryptocurrency market faces significant challenges and opportunities as it embarks on a new year. The three checkpoints identified by Hougan highlight the interplay between market dynamics, regulatory developments, and broader economic conditions. Observing these factors will be crucial for understanding the potential trajectory of cryptocurrencies like Bitcoin, Ethereum, and Dogecoin in the coming months.

Impact on the Crypto Market

• The absence of another significant liquidation event could instill confidence among investors, potentially leading to sustained growth.
• Legislative progress on the CLARITY Act could establish a more favorable regulatory framework, fostering long-term market stability.
• Equity market stability is essential; significant downturns could undermine investor sentiment across all risk assets, including cryptocurrencies.
• Institutional adoption and real-world use cases for cryptocurrencies may continue to grow, contributing to market resilience.
• The overall sentiment in the crypto market could shift positively if the remaining hurdles transition from “Yellow” to “Green.”