A quiet end to 2025 could set the stage for a sharper crypto recovery in 2026. Matt Hougan, chief investment officer at Bitwise, believes that the lack of a year-end rally reinforces the idea that the next big bull phase for digital assets will loom next year.
In brief
- A moderate end to 2025 builds confidence in a stronger crypto cycle in 2026, according to Matt Hougan, CIO of Bitwise.
- Analysts expect rate cuts and an end to quantitative tightening, both of which could serve as powerful drivers of liquidity.
- Growing use of stablecoins, tokenization initiatives, and renewed interest in DeFi are supporting market dynamics.
- New retail investors continue to accumulate through ETFs, despite experienced investors taking profits.
Moderate end to 2025 could give crypto advantage in 2026, says Hougan
At The Bridge conference in New York, Hougan explained that a strong rise at the end of the year would have corresponded to the usual four-year crypto cycle, leaving us expecting a correction in 2026. Conversely, a slower end of the year reinforces, according to him, the probability of an expansion still to come.
He added that the main risk for his scenario would have been a sudden surge in prices before the end of 2025. As this rally did not take place, he considers the context more stable: “I am actually more confident in this vision,” he said, recalling that a peak followed by a decline would have raised more concerns.
Analysts see rate cuts and liquidity changes as key drivers for 2026
Beyond Hougan's expectations, other analysts are monitoring a range of macroeconomic factors that could support crypto markets. Ben Lilly of JLabs Digital and Browns Research expects several developments that could act as tailwinds if the predictions come true.
Lilly points out that current projections place a high probability of a 25 basis point cut in the Federal Reserve's policy rates. He also anticipates an end to quantitative tightening in December. At the same time, the normal resumption of government operations could increase liquidity when flows from the Treasury's general account begin to circulate again.
Bitget CEO Gracy Chen confirms that the reopening of government activities has restored some stability after several weeks of uncertainty.
As market sentiment resets, several trends could influence crypto's trajectory in 2026:
- increased interest in bitcoin as a hedge against currency depreciation;
- rapid adoption of stablecoins in major markets;
- the rise of tokenization projects led by major institutions;
- a renewed interest in decentralized finance tools;
- a return of confidence in investor behavior.
Hougan believes these forces remain solidly in place. In particular, he cites Uniswap's new fee change proposal, introduced this week, which could reignite interest in DeFi in 2026. He adds that institutional flows, regulatory advances and new applications around digital assets appear robust enough to maintain momentum.
However, Hougan remains more cautious than some analysts with aggressive forecasts. Arthur Hayes, CIO of the Maelstrom Fund, and Tom Lee of Fundstrat had envisioned Bitcoin at $250,000 and Ether at $15,000 by the end of the year. At current levels, $101,762 for Bitcoin and $3,416 for Ether, these targets would require gains of 145% and 340%, respectively.
Market decline driven by long-time investors, while new ones continue to accumulate
Hougan also commented on the recent phase of market weakness, evoking a form of weariness among retail investors present since the previous cycle. Many withdrew after exchange failures, the underperformance of altcoins and successive liquidations. He describes this group as “disheartened,” hoping for a repeat of the 2020-2021 rally that did not materialize.
Crypto-native retail investors are depressed; they were beaten by FTX, beaten by the memecoin fiasco, beaten by the altcoin season that never arrived. They suffered from the 10/10 selloff, and I think they're just hanging back this time.
Matt Hougan
Recent selling by long-time investors, often after large gains, has also limited short-term progress, he said.
On the other hand, interest from the general public remains strong. Hougan highlights steady flows into spot crypto ETFs over the past two years as a sign of continued adoption. He notes that many new investors, including those with no prior experience with digital assets, continue to accumulate, even as more seasoned users are cautious.
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