Can the crypto bull market return to historical highs? Bitwise analyzes the three major variables that could influence how far the market can go

Bitwise states that whether the cryptocurrency market can continue to rise in 2026 depends on three major tests: systemic risk, legislative progress, and the stability of the US stock market. The first hurdle has been cleared, and the outlook remains cautiously optimistic.

The cryptocurrency market started 2026 with steady performance, with Bitcoin and Ethereum posting weekly gains of 4.7% and 10%, respectively. Dogecoin (DOGE), which serves as a market sentiment indicator, surged over 20% in one go. Strong buying activity indicates that investors’ risk appetite has fully returned.

However, is this rally a fleeting moment or the beginning of a comeback? Digital asset management firm Bitwise released a report on Tuesday stating that whether the market can regain glory or even hit new all-time highs this year depends on passing “3 major tests.”

Bitwise Chief Investment Officer Matt Hougan analyzed in the report that although the start has been impressive, the cryptocurrency market still needs to satisfy three core conditions to sustain this momentum. The good news is that the first hurdle appears to have been successfully crossed.

First hurdle: Will there be another “systemic shock” in the market?

The first major test pointed out by Matt Hougan concerns whether there are still unexploded bombs in the market. Looking back at October 2025, the crypto market experienced an epic liquidation wave, with futures contracts worth up to $19 billion being wiped out in a single day.

After the event, there was concern that large market makers and hedge funds might be forced to sell assets to realize gains, creating ongoing selling pressure.

However, Hougan believes these concerns have eased. If there had been significant liquidation pressure, it would have likely exploded before the end of last year. Based on the market performance in early 2026, investors have evidently been gradually digesting this shadow.

Second hurdle: Can cryptocurrency legislation pass?

The second test comes from the US political and regulatory environment. Hougan pointed out that the US cryptocurrency market structure bill is currently under review in Congress. The Senate Banking Committee is expected to examine the bill in mid-January, which will be a critical battle for the bill’s passage.

Although there are still disagreements between parties on issues like DeFi regulation and stablecoin reward mechanisms, and political struggles are unpredictable, Hougan emphasized that passing the bill would be a historic milestone.

Conversely, if legislation is delayed indefinitely, the currently friendly regulatory environment could reverse with changes in political power. Bitwise describes this as “cautiously optimistic, but no definitive conclusion yet.”

Third hurdle: Can the US stock market “stay stable”?

The final hurdle relates to the overall risk asset environment. Hougan stated plainly that cryptocurrencies need a “relatively stable” stock market backdrop.

While the correlation between cryptocurrencies and stocks has loosened compared to the past, a 20% correction in the S&P 500 would likely drag down all risk assets in the short term.

Current market forecasts suggest that the probability of a US recession this year is low, and the chances of stock market gains are higher. However, external variables beyond control still exist for the crypto market.

Conclusion: Structural bullish support, optimistic outlook

Overall, Bitwise believes that the development prospects of the cryptocurrency market remain solid. With continued institutional entry, expanding stablecoin and tokenization applications, and the gradual fermentation of a more friendly regulatory environment starting in early 2025, the market has long-term support.

As long as legislative progress continues and the global market environment does not experience severe disruptions, Bitwise is confident that the strong momentum shown by the crypto market in early 2026 can be sustained.

Further reading
This year will be awesome! Bitwise’s Top 10 Predictions for 2026: Bitcoin hits new highs, crypto ETF issuance surpasses 100

• This article is reprinted with permission from: 《Block Guest》
• Original title: 《Can the Crypto Market Continue to Hit New Highs in 2026? Bitwise Reveals “3 Major Tests” to Overcome》
• Original author: Block Sister MEL