Crypto’s 2026 Rally Faces 3 Key Hurdles: Regulation, Markets, Fallout

The first hurdle identified by Hougan stems directly from the traumatic market event of October 10, 2025. On that day, crypto assets experienced the largest single-day liquidation event on record, wiping out nearly $19 billion in futures positions. The immediate aftermath sparked deep concern that major market makers or hedge funds could have been critically wounded, potentially forcing them into a protracted wind-down of operations and consequent asset sales. Hougan described this fear of forced selling as a “heavy fog” that hung over the market, suppressing any rally throughout the fourth quarter of 2025.

However, the Bitwise executive posits that the most dangerous period for such fallout has likely passed. He argues that if major entities were going to fail as a direct result of the October liquidation, it would probably have occurred by the end of the year. The absence of any visible, large-scale collapses or distressed selling into early 2026 suggests investors are beginning to put the event behind them. This clearing of the first hurdle provides a foundational layer of stability upon which the current rally is attempting to build.

The second and perhaps most pivotal hurdle is regulatory. All eyes are on the progress of the comprehensive crypto market structure bill known as the CLARITY Act, currently moving through the U.S. Congress. Hougan emphasizes that passage of this legislation is “critical for the long-term future of crypto in the United States.” The Senate is targeting a key procedural step—committee markup—for January 15, which involves reconciling drafts from the banking and agriculture committees before advancing the bill toward a full vote.

Significant challenges remain, including divergent views on regulating decentralized finance (DeFi), stablecoin rewards, and political conflicts of interest. Despite these, clearing the markup stage would represent a major step forward. The bill’s importance, as outlined by Hougan, lies in its potential to “enshrine” core regulatory principles into law, thereby reducing the risk that the current pro-crypto stance at agencies like the SEC and CFTC could be reversed under a future administration. White House crypto czar David Sacks has stated the industry is “closer than ever” to passing the bill. Prediction market Kalshi currently places the odds of passage at 46% by May and 82% by year’s end, figures Hougan cites as a basis for “cautious optimism.”

The third condition for crypto’s continued rally involves the broader macroeconomic environment, specifically the equity market. Hougan notes that crypto does not require the S&P 500 (SPX) to be in a “raging bull phase” to perform well, but it must avoid a sharp decline. A significant pullback, such as 20% in the S&P 500, could negatively impact all risk assets, including cryptocurrencies, in the short term. Current prediction markets suggest a low probability of a recession in 2026 and roughly an 80% chance of gains for the index, providing a supportive backdrop for now.

Despite this structured, hurdle-based optimism from Bitwise, other voices in the industry paint a more cautious picture for Bitcoin’s trajectory. Pseudonymous analyst Doctor Profit contradicts the bullish narrative, repeatedly stating that Bitcoin entered a bear market in September 2025 and has not yet completed its bottoming process. While he anticipates no major crash in early 2026 and even sees potential for a short-term rally toward the $97,000-$107,000 range, his overall outlook remains “fully bearish.” Doctor Profit continues to target prices below $70,000 for BTC in the coming months, suggesting that any current strength may be a temporary reprieve within a larger corrective phase.

This divergence underscores the complex and uncertain landscape facing crypto investors in 2026. The market’s strong opening must now contend with the tangible realities of regulatory progress, macroeconomic stability, and unresolved technical bearish signals. The path forward, as outlined by Hougan, is clear but narrow, requiring the successful navigation of each identified hurdle to transform early-year strength into a sustained annual rally.