Will cryptocrash or rally? Watch for these catalysts

After a brutal 2025 that wiped more than $1.2 trillion from the crypto market, investors are now looking to 2026 as a make-or-break year—one that could either mark the industry’s recovery or deepen what many already consider its worst downturn since the last major cycle.

The crypto market experienced a steep decline over the last two quarters, with Bitcoin (BTC) and most altcoins falling by double digits from their highest levels this year.

Bitcoin declined from the year-to-date high of $126,200 to the current $88,000, while the market capitalization of all tokens fell from the year-to-date high of $4.3 trillion to the current $2.9 trillion. 

This article examines key factors that will determine whether the crypto market crash accelerates or a rally ensues.

Crypto market to react to the CLARITY Act 

One of the key catalysts for the crypto market will be regulations, especially the CLARITY Act that is being debated in the Senate.

The bill, which has already passed the House of Representatives, aims to provide greater certainty in the crypto industry by allocating responsibilities between the Securities and Exchange Commission and the Commodity Futures Trading Commission. 

If it passes, it will be the second major bill by the current Congress. The last one was the GENIUS Act, which focused on regulating the stablecoin industry, which is now valued at over $308 billion.

In addition to CLARITY, the SEC, under Paul Atkins, has vowed to be more friendly to the crypto industry. Indeed, in January, the agency will grant an industry exemption to launch products without following the full regulatory process.

Retirement accounts investing in cryptocurrencies 

Another potential catalyst for the crypto market will be the approval of employer-sponsored plans to invest in cryptocurrencies and other private assets, such as private equity and credit.

President Donald Trump has proposed this, and it may become feasible in 2026. Such a move will be bullish for the crypto market as it will unlock trillions of dollars that may flow to the industry.

Another policy that may be bullish is the proposed tariff dividend, which would distribute checks to Americans. Additionally, Trump and Treasury Secretary Scott Bessent have promised to offer the largest tax refund to Americans.

These policies will increase demand for risky assets such as stocks and cryptocurrencies, thereby boosting their prices over time. 

Federal Reserve interest rate cuts 

Other potential catalysts for the crypto market rally in 2025 will be actions by the Federal Reserve. The initial catalyst will be Trump’s appointment of a Fed chairman.  

Trump has indicated that he will appoint a Federal Reserve official who would be comfortable cutting interest rates to 1%. That Fed Chair will be more different from Jerome Powell, who has demonstrated his independence.

Analysts expect the Federal Reserve to cut interest rates several times in 2026, a move that will push the U.S. M2 money supply well above the current $22 trillion. Bitcoin and other altcoins often do well when the M2 money supply is soaring.

Bitcoin price needs to overcome bearish technicals 

Technicals suggest that the crypto market crash has more room to run in the coming year. The weekly timeframe chart indicates that Bitcoin has formed a large rising wedge pattern and is now forming a bearish pennant.

Bitcoin has also moved below the Supertrend indicator on the weekly chart, indicating further downside in the coming year. Therefore, the fundamentals highlighted here must overcome these bearish chart patterns to prevent a crypto market crash.