Bitwise Identifies 3 Key Tests for Crypto's 2026 Rally

Asset manager Bitwise outlined three critical tests for the sustainability of a crypto rally in 2026. The firm emphasized the need for regulatory clarity, stable equity markets, and continued institutional adoption. These factors will shape the broader environment for digital assets in the year ahead.

Legislation around digital assets continues to evolve, particularly in the U.S. and the U.K. The CLARITY Act, a key crypto market structure bill, has been delayed but remains a priority for both parties in Congress. If passed, it would clarify oversight between the SEC and CFTC and provide a regulatory framework for digital commodities.

Stablecoin adoption is also growing rapidly, with the GENIUS Act providing a foundation for regulated stablecoin issuance by banks. This has led to increased institutional participation, with stablecoins reaching a market cap of over $300 billion by year-end 2025.

Why Did This Happen?

The shift toward crypto-friendly policies is driven by bipartisan support in the U.S. and growing global interest in digital assets. The passage of the GENIUS Act in 2025 laid the groundwork for a more structured approach to stablecoin regulation. This, in turn, has encouraged major financial institutions to explore stablecoins and tokenized assets.

Regulatory clarity has also reduced uncertainty for market participants. The Federal Reserve removed restrictions on banks offering crypto services, while the FDIC proposed a framework for stablecoin issuance. These changes signal a more accommodating environment for digital assets.

How Did Markets Respond?

The market has responded positively to the regulatory developments. Stablecoins and tokenized assets have seen increased adoption, with stablecoins now accounting for over 30% of on-chain transactions. The U.S. has also seen the launch of several crypto-related ETFs, including bitcoin and ether funds.

Despite the progress, challenges remain. The CLARITY Act faces political hurdles, with Democrats seeking ethics standards for senior officials and conflict-of-interest provisions. These provisions could delay passage until 2027, according to some analysts.

What Are Analysts Watching Next?

Analysts are closely monitoring the progress of the CLARITY Act and the broader regulatory landscape. Bitwise highlighted that a sharp decline in the S&P 500 could weigh on crypto markets, despite the low probability of a recession in 2026. Prediction markets currently favor strong equity gains.

Institutional adoption is another key focus. Major asset managers are increasing crypto allocations, with 71% planning to raise exposure in the next year. This trend supports long-term growth but remains modest, with only 7% of assets under management currently invested in crypto.

Stablecoin and tokenization developments will also be important. The expansion of stablecoin usage and the growth of real-world asset tokenization are seen as structural trends that could drive further adoption.

Overall, the outlook for crypto remains constructive. With regulatory clarity improving and institutional participation growing, the market is poised for sustained momentum, provided broader economic conditions remain stable.