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The cryptocurrency market recently experienced a brief uptick, but it has once again encountered increased volatility, with Bitcoin (BTC) and other major crypto assets retracting some of the gains achieved earlier in the week.
Amid this churning landscape, Matt Hougan, Chief Investment Officer at Bitwise, has outlined three essential “checkpoints for a rally,” which he believes must be met for a lasting cryptocurrency recovery this year.
Key Hurdles For Crypto Rally
In the report released on January 6, Hougan highlighted the first hurdle for a sustained rally: avoiding a repeat of the catastrophic events that transpired on October 10, 2025. On that day, the market witnessed the largest liquidation event in its history, erasing approximately $19 billion in futures positions in just 24 hours.
The aftermath of this event raised concerns among investors about the potential long-term health of significant market players such as hedge funds and major market makers. Many feared that these entities might need to liquidate assets to stabilize their operations, a scenario that could weigh heavily on the market.
However, Hougan expressed a degree of optimism, suggesting that if any major firm were poised for a downturn, it likely would have occurred by now. He argues that investors have begun to move past the traumatic experience of October 10, contributing to the recent rally at the start of the new year.
The second checkpoint outlined by Hougan is the passage of the crypto market structure bill, known as the CLARITY Act, which is currently making its way through Congress with the anticipated markup scheduled for January 15.
This process involves aligning various drafts from the Senate banking and agriculture committees to reach a final vote. However, NewsBTC reported on Wednesday that several hurdles remain, including differing perspectives on how to regulate decentralized finance (DeFi) and stablecoin rewards.
Legislative Framework Essential
Hougan emphasized that the approval of the CLARITY Act is crucial for the long-term viability of cryptocurrencies in the United States. Without a legislative framework, Hougan stressed that the current pro-crypto stance at regulatory agencies could shift dramatically under future administrations.
Bitwise’s CIO emphasized that passing the crypto market structure bill would solidify key regulatory principles into law, providing a sound foundation for ongoing growth in the crypto sector.
The final hurdle for a sustained crypto rally is maintaining stability in the broader equity market. While cryptocurrencies do not operate in lockstep with stocks, a significant downturn—such as a 20% drop in the S&P 500—could dampen enthusiasm for all risk assets, including digital currencies.
Hougan also notes growing concerns about a potential artificial intelligence (AI) bubble. However, current prediction markets suggest a low probability of a recession in 2026 and an approximately 80% chance of gains for the S&P 500.
Featured image from DALL-E, chart from TradingView.com
