Bitcoin comes under renewed pressure as looming Fed hike adds to woes
Clarity Act, a crypto regulatory bill in the US, fails to progress in the Senate, disappointing investors who were banking on it to give the market direction
Bitcoin faced renewed pressure as the US government failed to advance a crucial regulatory bill, coinciding with potential interest-rate hikes by the Federal Reserve. The cryptocurrency's value dropped 4% during US trading before stabilizing around $75,700 in Singapore. The overall cryptocurrency market also suffered losses after similar declines in the US.
Regulators hoped the Clarity Act, a bill aimed at improving crypto market structure, would alleviate the market's 11-month downturn. However, the bill's low chances of passing led to market uncertainty. Inflation fears and increasing US bond yields are expected to prompt Fed Chairman Kevin Warsh to raise rates on Wednesday, further dampening risk assets like Bitcoin.
As a result, over $560 million worth of bullish bets on cryptocurrencies were unwound in the past 24 hours. Despite this, there remains a higher probability of Bitcoin increasing than decreasing, according to Deribit data. Bitcoin traders have shown resilience, with $1.7 billion in calls held at the $80,000 level.
Industry leaders expressed concern over the bill's failure, with Ripple Labs CEO Brad Garlinghouse and Coinbase CEO Brian Armstrong calling for post-mortems and expressing the need for clearer regulations. They suggested that the Securities and Exchange Commission and the Commodity Futures Trading Commission could offer a stable regulatory framework in the absence of legislation. However, agency rules might be easier for future administrations to alter.
Samson Leo, chief legal officer at Singapore-based stablecoin issuer StraitsX, emphasized the need for clear frameworks, as prolonged market uncertainty hampers efforts to address fragmentation. The immediate focus is on the Federal Reserve, with markets pricing a greater than 90% chance of a 25 basis-point hike. Caroline Mauron, co-founder of Orbit Markets, noted that inflation concerns could revive the debasement trade, which is positive for Bitcoin, but bond yields and market volatility may take it down before it goes up.
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