Crypto markets have kicked off 2026 with some genuine momentum. Bitcoin (BTC) and Ethereum (ETH) are both sitting around 7% higher for the year, and the riskier altcoins have done even better. But is this just a bounce, or the start of something more sustained?

Matt Hougan, chief investment officer at Bitwise Invest, thinks the rally can keep going if three specific boxes get checked. Let's walk through them.

First: No Major Market Blowups

The scariest near-term risk has been another forced liquidation event similar to what happened on Oct. 10, 2025, when nearly $19 billion got wiped out in a deleveraging cascade. That kind of shock can derail any rally in minutes.

The good news? Hougan says this risk has mostly passed. Concerns about large market makers or hedge funds being forced to unwind positions have eased considerably. That removes a major ceiling that was keeping prices capped.

Second: Regulatory Clarity Through the CLARITY Act

This is where things get interesting. Hougan believes passing the CLARITY Act would fundamentally change the game by embedding pro-crypto rules directly into U.S. law. That would dramatically reduce the risk of future regulatory whiplash.

There's momentum building around the bill, but political and procedural hurdles mean it's still unresolved. Hougan expects clearer progress later in 2026, but for now, it remains a question mark.

Third: Stable Equity Markets

Crypto still needs a relatively calm backdrop in traditional markets. Hougan isn't predicting a stock market crash, but a sharp equity drawdown would almost certainly drag down all risk assets, including digital currencies.

With recession risks looking low and institutional adoption continuing to grow, equities remain a crucial variable to monitor.

What the Charts Are Saying

Crypto analyst Ali Martinez notes that Bitcoin's TD Sequential indicator is now flashing a buy signal after correctly identifying a local top near $94,000. This suggests downside momentum may be exhausted and a local bottom could be forming.

Meanwhile, analyst Titan of Crypto points out that while a deeper pullback earlier would have been healthier for bullish continuation, Bitcoin instead swept upside liquidity, which increases the odds of a temporary downside move.

For now, BTC remains range-bound with no clear directional bias until a decisive breakout happens.

Hougan's overall outlook for 2026 remains cautiously bullish, but it's entirely contingent on regulatory progress, macro stability, and the market avoiding another major deleveraging shock. In other words, if those three conditions hold, this rally might have legs. If not, we could be back to waiting.