Three major challenges, one opportunity: Bitwise CIO's view of the 2026 crypto market

Bitwise Chief Investment Officer Matt Hougan recently issued a client briefing, noting that although Bitcoin and Ethereum have risen about 7% in early 2026, the crypto market needs to overcome three key challenges to sustain this momentum. This perspective is noteworthy because it reflects both current optimistic signals in the market and potential risk factors for investors.

Details of the Three Major Challenges

Hougan’s identified challenges each have distinct characteristics, involving market structure, policy environment, and macroeconomic factors.

Challenge 1: Avoid Large-Scale Market Collapse

The first challenge is to prevent a large-scale market crash similar to October 10, 2025. That event resulted in over $20 billion in futures positions liquidated, causing significant market disruption. Hougan believes this challenge has been largely addressed, reflecting improvements in market structure—such as the launch of spot ETFs and increased institutional participation—leading to greater resilience against extreme futures volatility.

Challenge 2: Advancing the Clarity Act Passage

The second challenge is to push for the passage of the U.S. Clarity Act crypto legislation. The bill is currently under review in Congress, with a Senate markup expected on January 15. This is a critical policy milestone; passing the bill would provide a clearer regulatory framework for the crypto industry and facilitate further institutional involvement. From recent news, the U.S. regulatory environment has shown a clear shift, with major financial institutions like Bank of America and Morgan Stanley systematically allocating to Bitcoin, which is a response to this policy shift.

Challenge 3: Maintaining Stock Market Stability

The third challenge is to maintain stability in the stock market. This reflects the correlation between crypto assets and traditional risk assets—when stocks decline sharply, crypto assets often get dragged down. While this external factor is beyond the crypto market’s full control, it remains a risk that warrants close attention.

Opportunities Behind Accelerated Institutional Adoption

It is worth noting that although Hougan listed three major challenges, positive factors are accumulating based on recent information. The acceleration of institutional adoption is particularly evident:

According to the latest reports, Bank of America has authorized its Merrill, Merrill Private Bank, and Merrill Edge advisors nationwide to recommend four spot Bitcoin ETFs, suggesting an allocation of 1-4% of investment portfolios. This indicates that traditional financial institutions are increasingly integrating crypto assets into standard asset allocation frameworks.

Meanwhile, capital inflows into crypto spot ETFs remain strong. The Solana spot ETF saw a net inflow of $16.8 million in the past day, marking the largest single-day inflow since listing, with total AUM exceeding $1 billion. These data points demonstrate a clear increase in institutional investor participation.

Balancing Challenges and Opportunities

Hougan’s core assessment is: if these three major challenges can be successfully addressed, the crypto market’s rally in early 2026 could continue throughout the year. This judgment is reasonable. Based on current market performance, the first challenge (market structure) has been largely resolved, the second challenge (policy environment) is progressing, and only the third challenge (stock market stability) remains an external factor that is hardest to predict.

It is important to emphasize that while the passage of the Clarity Act is expected to be marked in the Senate on January 15, final approval will still take time. This policy development will be an important point to watch moving forward.

Summary

Bitwise CIO’s discussion of the three major challenges provides a clear framework for understanding the key risk points in the 2026 crypto market. Currently, improvements in market structure and accelerated institutional adoption are two significant positive factors, while policy progress and macroeconomic stability are variables to watch closely. For investors, the key upcoming events are the progress of the Clarity Act and stock market performance, both of which will largely determine whether the crypto market can sustain its current upward momentum.