Crypto Market Outlook 2026: Can Bitcoin and Ethereum Sustain the Rally?

The crypto market has entered 2026 with renewed momentum, but investors are now asking whether this rally can continue throughout the year. According to a recent blog post by crypto asset management firm Bitwise, early indicators suggest a constructive outlook, though several key conditions must remain in place for digital assets to reach new all-time highs.

Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrencies by market capitalization, are both up roughly 7% year-to-date just six days into 2026. Risk appetite has clearly returned, with speculative tokens posting even stronger gains. Dogecoin (DOGE), for example, has surged nearly 29%, highlighting growing investor confidence across higher-risk segments of the crypto market.

Bitwise Chief Investment Officer Matt Hougan outlined three major factors that will determine whether the crypto rally can be sustained. The first appears to be largely resolved: the absence of another major market shock. Hougan pointed to the October 10, 2025 liquidation event, when approximately $19 billion in crypto futures positions were wiped out in a single day. In the months that followed, fears of forced liquidations by large market participants weighed on sentiment. However, Bitwise believes any significant unwinding would have occurred by the end of 2025, and the strong start to 2026 suggests that overhang has faded.

The second critical factor is regulatory clarity in the United States. Proposed crypto market structure legislation is moving through Congress, with a Senate Banking Committee markup expected in mid-January, though timelines remain subject to change. While debates continue around decentralized finance regulation, stablecoin incentives, and political disagreements, Bitwise views progress on legislation as essential. Without clear rules, a future administration could reverse the current pro-crypto regulatory stance.

The final consideration is the broader macro environment. While crypto assets are not perfectly correlated with equities, a sharp stock market downturn—such as a 20% drop in the S&P 500—would likely pressure all risk assets. Prediction markets currently signal low recession risk and potential equity gains, but this remains an external uncertainty.

Overall, Bitwise sees the crypto market outlook for 2026 as cautiously optimistic, supported by rising institutional adoption, increased use of stablecoins and tokenization, and the delayed benefits of a more supportive regulatory environment that began in early 2025.