Three Checkpoints Remain Before Crypto Can Reach All-Time Highs in 2026

Crypto markets began 2026 with early gains, with Bitcoin and Ethereum each up around 7% year-to-date according to Bitwise. However, Bitwise's chief investment officer, Matt Hougan, has outlined three key hurdles that must be cleared for the market to sustain this rally and potentially reach new all-time highs as reported. These checkpoints include avoiding further market liquidations, passing the CLARITY Act, and maintaining stable conditions in the broader equity market according to analysis.

The first hurdle, avoiding a repeat of the October 2025 liquidation event that wiped out $19 billion in futures positions, appears to have already been cleared according to data. Investors are no longer fearing a major wind-down of market makers or hedge funds, which helped lift sentiment into 2026 as noted.

The second and most pressing checkpoint is the passage of the CLARITY Act, a crypto market structure bill currently moving through the U.S. Senate according to reports. The bill is set for a markup session on January 15, with the goal of enacting a framework that enshrines regulatory principles into law as detailed. Industry leaders, including White House crypto czar David Sacks, have said the bill is "closer than ever" to passage according to analysis.

Why the Clarity Act Matters

The CLARITY Act is seen as a cornerstone for long-term crypto growth in the U.S. according to industry analysis. It aims to clarify whether digital tokens fall under SEC or CFTC oversight and would provide a consistent regulatory framework for exchanges, custody providers, and institutional participants as explained.

The bill's structure requires coordination between the Senate Banking and Agriculture committees, with both needing to align their drafts before the bill can move to a full Senate vote according to reports. Delays in the legislation have already contributed to investor caution, as seen in recent outflows from crypto investment products according to Coinbase.

The importance of the CLARITY Act is underscored by global regulatory momentum. The EU's MiCA framework and the UK's stablecoin standards have created a competitive environment for U.S. crypto firms according to analysis. The U.S. is under increasing pressure to avoid falling behind in the global crypto race, with lawmakers and industry leaders urging swift action as stated.

How the Equity Market Affects Crypto

While crypto and stocks are not highly correlated, Hougan warned that a sharp selloff in equities could negatively impact all risk assets, including crypto, in the short term according to analysis. Prediction markets currently suggest a low probability of a 2026 recession and strong odds of gains for U.S. equities according to data.

The broader macroeconomic backdrop also plays a role. The Federal Reserve has not signaled any immediate rate cuts, and CME futures suggest a high probability of rates staying unchanged through the end of January according to market analysis. This environment supports risk-on sentiment but also highlights growing sensitivity to inflation risks and potential policy pauses as reported.

What Analysts Are Watching

Analysts are closely monitoring three key indicators: the CLARITY Act's progress, equity market stability, and macroeconomic conditions according to Bitwise analysis. If these factors align positively, Hougan said the early 2026 rally could gain significant momentum according to reports.

Institutional adoption is also a growing factor in the crypto market. The launch of spot ETFs for Bitcoin, Ethereum, and other major coins has opened new channels for institutional capital as reported. Morgan Stanley, for example, has filed for an Ethereum staking ETF, signaling broader acceptance among traditional financial players according to Cointelegraph.

Crypto investors are also seeing increased volatility compression and lower drawdowns, making the asset class more attractive for institutional allocations according to analysis. These changes could support a more stable, long-term growth trajectory for digital assets, provided regulatory clarity is maintained as noted.

The market remains cautious as it awaits key developments in early 2026. If the CLARITY Act passes, equity markets remain strong, and macroeconomic conditions stay favorable, the stage could be set for a significant crypto rally.