The passing of the Clarity Act could provide a much-needed boost to the digital assets market.
Bitcoin has staged a meaningful recovery over the past month, rising roughly 20% and returning to near the $80,000 level after a turbulent stretch for digital assets.
Despite the rebound, the cryptocurrency remains down close to 10% for the year, keeping 2026 firmly in negative territory for bitcoin holders.
The recent rally followed one of the largest crypto liquidation events in recent memory, which hit markets on August 19 and forced a significant deleveraging across the sector.
“We had some significant leverage,” said Michael Bucella, co-founder and managing partner of crypto investing firm Neoclassic Capital, speaking on CNBC’s “ETF Edge.”
That forced selling was followed by what Bucella described as “decent follow through on spot [market] and ETF buying,” helping stabilize prices and rebuild investor confidence.
The iShares Bitcoin Trust (NASDAQ: IBIT) took in roughly $3.5 billion in net flows over the past month, bringing it close to breaking even on flows for the full year.
Bucella identified the $83,000 to $86,000 range as the next key resistance zone, warning that “there’s a lot of long-term supply to chew through” before bitcoin can enter what he called “pretty good territory.”
While bitcoin is in “a lot healthier position” than most other crypto assets, Bucella flagged concern that altcoin leverage and open interest have returned to levels last seen before the October 2025 crash, when $19 billion in crypto leverage was wiped out in a single day.
Zach Pandl, head of research at Grayscale Investments, pointed to a growing “allocation” trade driving institutional interest, with investors seeking diversification beyond tech and AI through crypto exposure within ETF structures.
“Investors are saying, How do I build a diversified portfolio? I have a lot of tech and AI, and crypto gives me unique exposure. That type of allocation trade is happening in the ETF structure,” Pandl said on “ETF Edge.”
Macro forces are also playing a supporting role, with U.S. government debt crossing the $40 trillion mark last month, doubling over the past decade, feeding what Pandl described as intense demand for scarcity assets.
“Investors are craving scarcity assets, whether physical gold or bitcoin,” Pandl said, linking the trend directly to unchecked deficit growth and dollar weakness.
Treasury Secretary Scott Bessent announced $6 billion in Treasury bond buybacks this week, triple the normal level, a move Pandl interpreted as policymakers “treating the symptom because they can’t cure the disease.”
“The symptom is high interest rates but the underlying problem is structural deficits, and regardless of midterm outcomes, it’s not likely to deal with those challenges,” Pandl said.
On the political front, a crucial Senate procedural vote on the Clarity Act, which aims to establish a federal framework for digital assets, is approaching, though prediction markets assign it low odds of passing.
Coinbase CEO Brian Armstrong told CNBC’s “Squawk Box Asia” that consensus among crypto firms, law-enforcement groups, and several banks makes passage likely, but he acknowledged that regulatory clarity will arrive regardless of the vote’s outcome.
“Frankly, if it doesn’t pass, it’s also going to be a good outcome because the SEC and the CFTC have said that they’re ready to publish rulemaking, and we’re going to get regulatory clarity one way or another,” Armstrong said.
Pandl echoed that view, stating flatly, “We don’t necessarily need the Clarity Act,” citing recent CFTC approval of perpetual futures and SEC guidance on transfer agents and crypto issuance as meaningful progress outside the legislative process.
If Democrats retake the House, as prediction markets currently expect, prominent crypto skeptics including California Congresswoman Maxine Waters and Massachusetts Senator Elizabeth Warren are likely to assume key financial oversight positions, adding pressure on the industry.
Trump’s annual financial disclosure in June showed approximately $580 million in crypto gains, a figure likely to attract heightened scrutiny from newly empowered Democrats focused on the administration’s crypto-related conflicts of interest.
Pandl also flagged privacy-focused digital assets as a rising theme heading into the midterms, noting that Zcash has outperformed bitcoin and most other cryptocurrencies this year as AI-driven privacy concerns grow among investors.
“AI is amazing, but it’s raising a lot of privacy questions and we’re definitely being asked about Zcash and other privacy-preserving cryptos,” Pandl said, calling privacy “a big one” for the coming political cycle.
