“The industry can thrive without Congressional intervention,” stated Dan Morehead, the founder and managing partner of Pantera Capital, during an appearance on CNBC’s Squawk Box this Friday morning. As he spoke, bitcoin was trading just below $78,000. By the time Wall Street opened, it had surged past $80,000 for the first time since September 7, marking a 5% increase for the day and a 7% rise from the low recorded on Tuesday night, following the Senate’s decision not to advance the Clarity Act.
Timing is crucial. On Tuesday, the Senate narrowly blocked a cloture vote on the market-structure bill with a 49-50 result. The following day, the Federal Reserve implemented a quarter-point rate hike, raising rates to a range of 3.75% to 4%; this was the first increase since July 2023. In just two sessions, $746 million exited spot bitcoin ETFs. Thursday saw the Securities and Exchange Commission unveil its innovation exemption for tokenized stock trading, while the Commodity Futures Trading Commission submitted a rulemaking titled “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets” to the White House for review. By Friday, bitcoin was trading at $80,860 as of 17:19 UTC according to CoinGecko, with Solana experiencing a 10% rise and Hyperliquid’s HYPE token setting a record at $92.56.
‘Implementing Necessary Changes’
The CFTC filing is a noteworthy development. The Office of Information and Regulatory Affairs, the White House entity responsible for reviewing federal regulations prior to publication, recorded it as submitted on September 17 under RIN 3038-AF80 at the “prerule” stage. This indicates that the public will first see a document that is a preliminary step before a formal proposal, like an advance notice or request for public comment. The CFTC refrained from commenting on the specifics to The Block.
Morehead contends that the agencies are acting where the Senate did not. “The SEC and the CFTC are implementing measures that would have been covered under the Clarity Act,” he stated. “Therefore, in practical terms, it shouldn’t make a significant difference.”
In an interview on Thursday, Alex Cutler, co-founder of the decentralized exchange Aerodrome, echoed this sentiment. “Until we obtain something akin to Clarity, it falls on regulators from the SEC and CFTC to interpret existing laws and apply them to emerging technologies,” Cutler explained. He highlighted the change in leadership at these agencies: “With new personnel at the CFTC and SEC, there’s a shift in how they are interpreting existing laws to facilitate on-chain developments.”
Kevin O’Leary, chairman of O’Leary Ventures, mentioned at the Avalanche Summit in New York this week that he doesn’t anticipate the Clarity Act will pass before the midterms. However, he believes that lawmakers drafting tax regulations for digital assets will bring regulatory discussions back into focus. “If tax policy is to be established for this asset class, it necessitates increased regulation, not decreased,” he noted. On Friday, Polymarket traders estimated the odds of the act being signed this year at 8%, a rise from 4.6% shortly after the vote.
‘Entering a Bullish Phase’
The on-chain data shifted before the price change. At 10:11 UTC on Friday, with bitcoin hovering around $78,000, Glassnode reported that the cryptocurrency had reclaimed its True Market Mean—representing the average price paid for coins in secondary markets—which placed it “back into a bullish phase,” according to the firm. “The next significant resistance is the corporate treasury cost basis around $80K, followed by the ETF cost basis at $85K.” Just four hours later, the first resistance level was surpassed, with approximately $250 million in short positions liquidated across the crypto space, as per Coinglass data cited by Cointelegraph.
The flow of funds had already shifted. Spot bitcoin ETFs recorded a net inflow of $159.5 million on Thursday, with BlackRock’s IBIT alone contributing $183.7 million, based on data from Farside Investors mentioned by Coinpaper. Although the three days following the vote resulted in a total outflow of $586.8 million, the momentum changed on the day that agencies made their moves.
Analysts at JPMorgan, led by Nikolaos Panigirtzoglou, noted this week that short interest in IBIT is nearing its highest point of the year. A reduction in these short positions “could provide additional support for bitcoin in comparison to gold moving forward,” The Block reported. These shorts are typically impacted during a day with a 5% increase.
‘The Fed is Lagging’
The rally occurred even as the likelihood of another interest rate hike rose, rather than diminished. Polymarket’s October contract indicated a 55.5% chance for a quarter-point increase on Friday, up from 46.5% the previous day. Morehead interprets this as a key factor: “People’s optimism for Bitcoin stems from the belief that the Fed is still trailing behind. They have generated 30% inflation this decade alone,” he remarked. “They continue to maintain an accommodative stance, which is favorable for Bitcoin. Rates ought to be considerably higher than they currently are.”
Critics of cryptocurrency remain unconvinced. “If an asset moves 8% within an afternoon due to a single statement from a central banker, it’s not hedging against inflation; it’s a speculative position,” argued Mike Law, a property broker at Coulee Land Company.
Other experts express doubts about the situation. “It’s strange how well the markets are responding after the dual setbacks of the Clarity Act’s failure and Warsh’s aggressive rate hike on Wednesday,” observed Jeff Anderson, head of U.S. operations at STS Digital, in a note on Thursday, as reported by The Block.
Zach Pandl, Grayscale’s head of research, highlighted a trend a week prior to the vote. “When the price of an asset, whether it’s crypto or anything else, halts its decline amid negative news, it often signals that it’s oversold,” he explained during a recent episode of Cointelegraph’s Trade Secrets show, broadcasted on September 11, asserting that the low of $58,000 in June marked a turning point. In August, Glassnode had cautioned that breaking below $58,500 could trigger a deeper decline, whilst Polymarket traders anticipated $80,000 as a target by year-end.
Glassnode’s next resistance point sits at $85,000, which corresponds to the average price paid by ETF investors. O’Leary is positioning himself for the upcoming attempts. “I’m back in the market, acquiring new positions and making my bets for this next cycle,” he disclosed.