Pressure picked up midweek after senators did not move the Clarity Act forward on Tuesday, denting hopes for long awaited market-structure rules. After more than a year of debate, the measure was considered unlikely to pass given partisan tensions in the Senate this week. Traders had pinned some optimism on the bill as a way to break an 11 month rut in digital assets.
At the same time, inflation concerns and surging Treasury yields have traders expecting Warsh to raise rates on Wednesday, a backdrop that usually dampens appetite for Bitcoin and other risk assets. The coin steadied near $75,900 early in New York after Tuesday's drop, and the broader market was still reeling from the prior day's declines.
Coinglass data showed that more than $540 million of bullish cryptocurrency wagers were unwound over the past 24 hours. Institutional interest also faded, with US-listed spot Bitcoin ETFs recorded net outflows topping $450 million on Tuesday, marking the largest one-day withdrawal since June.
Positioning still shows some backbone. On Deribit, there are more upside bets than downside ones on Bitcoin, including roughly $1.7 billion in calls clustered at the $80,000 strike across expiries.
According to James Butterfill, who leads research at CoinShares, "The failure to advance the Clarity Act is undoubtedly a setback for the US digital asset industry, but it looks more like another delay than the end of the road." "For markets, this is incrementally negative rather than a major shock."
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A portfolio manager at Apollo Crypto, Pratik Kala, said, "The inability to move Clarity forward adds additional headwinds in the short term for a move up in Bitcoin." "Until investors gain more certainty on the path of rates globally, risk assets would remain under pressure," he added.
Frustration boiled over on X after Tuesday's failed Senate vote. Ripple Labs CEO Brad Garlinghouse called for a post mortem on why the bill faltered, while Coinbase CEO Brian Armstrong argued the industry cannot keep waiting for Congress. Both pointed to the SEC and CFTC as capable of laying out a clear framework in the absence of new laws, though rules set by agencies could be easier for a future administration to rewrite.
Samson Leo, chief legal officer at Singapore based stablecoin issuer StraitsX, said, "This points to the larger challenge ahead." "The longer major markets operate without clear and compatible frameworks, the harder it becomes to address fragmentation."
Swaps markets pinned the odds of a 25 basis point hike above 90 percent going into Wednesday. Caroline Mauron, co founder of Orbit Markets, said, "Market turmoil is to be expected across all asset classes if Warsh fails to hike rates." She also noted that concerns about inflation could rekindle the debasement trade, which tends to favor Bitcoin, but "bond yields mayhem and general market volatility will probably take it down first before it goes up."
That cocktail of a stalled rulebook, unwound bullish bets, ETF outflows, and a likely rate move points to near term headwinds for risk assets. If you hold crypto, the bigger picture to watch is how policy clarity and the rate path evolve from here.
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