Crypto Market Crashes After CLARITY Failure: More Risk Ahead

The cryptocurrency market is facing a steep price correction after the US Senate voted against passing the highly anticipated CLARITY Act. CoinGecko data shows that Bitcoin (BTC) has fallen 2.1% in the last 24 hours, 4.1% in the last week, and 2.1% in the 14-day charts. Despite the correction, BTC is still up by 19.5% over the last month. While the CLARITY Act failure may be a barrier to the crypto market, there are additional risks that could pull the market down further. Let’s discuss.

Cryptocurrency Market To Face More Challenges After CLARITY Act Failure?

The CLARITY Act was a major bill that aimed to reinforce the Trump administration’s pro-crypto stance. President Trump even gave in to having more ethics language in the bill which specifically targeted his cryptocurrency empire. However, the changes were not enough to push the bill into law. Retail investors may feel hesitant to invest in the cryptocurrency market right now.

The cryptocurrency market could face another price correction from a potential interest rate hike. Federal Reserve Chair Kevin Warsh gave quite a hawkish speech at the Jackson Hole meeting. Warsh emphasized on rising inflation, which many took as a sign that the Fed would raise interest rates after its FOMC (Federal Open Market Committee) meeting. The August jobs data also did not inspire confidence, which further strengthened the chances of an interest rate hike. A rate hike could lead to capital flowing out of the cryptocurrency market.

Also Read: Morgan Stanley Starts Heavily Accumulating Bitcoin (BTC)

Risk appetite is considerably low right now. The economy is also far from recovered. The development may lead to investors moving their funds away from the cryptocurrency market and into safer bets, such as gold. Nonetheless, many analysts anticipate the cryptocurrency market to gain steam by the end of this year. Bernstein predicts Bitcoin (BTC) to reclaim the $100,000 price level by the end of 2026. BTC hitting $100,000 could trigger another bull run for the cryptocurrency sector.