Crypto is heading into a rare week where Washington and the Fed could pull the market in different directions. The industry’s long fight for clearer rules now has a Senate vote attached, while renewed rate pressure threatens the risk appetite that digital assets depend on.
Crypto gets its Senate test
The Clarity Act would establish a new framework for crypto markets and reduce the SEC’s role over parts of the industry. Getting it through the Senate requires 60 votes, putting bipartisan support at the center of the next step.
The latest draft attempts to address some of the biggest sticking points. It adds ethics provisions covering President Donald Trump and other officials with crypto holdings, while giving state attorneys general a role in enforcement.
Trump’s own crypto interests remain part of the fight after he disclosed more than $1B from crypto-linked investments over the past year, including World Liberty Financial.
Even with the latest changes, passage remains far from certain. TD Cowen analyst Jaret Seiberg sees a 25% chance of the bill becoming law this year, while Beacon Policy Advisors recently moved its estimate into the 30%–40% range.
Traders move before Washington
The market is already reacting to the changing outlook. Prediction-market odds of passage this year roughly doubled to around 30%, helping lift Bitcoin and crypto-linked stocks including Coinbase Global, Circle Internet Group, and Bullish.
Clear Street analysts called the ethics compromise the “most important single change” in the revised bill. They see the latest draft as a better setup for Coinbase, Circle, and Bullish if lawmakers can keep the legislation moving.
That makes regulation a tradable catalyst well before the final vote. Crypto does not need certainty to react when investors see the path through Washington becoming more realistic.
Leverage raises the stakes
The recent volatility is not coming from policy alone. Ether’s rebound was amplified by forced buying as traders betting against the token were pushed out of their positions.
More than $300M in Ether shorts were liquidated over 24 hours, with Bitcoin also seeing heavy liquidations. Across digital assets, the unwind reached roughly $668M as sharp moves forced leveraged traders on both sides out of positions.
“The move is partially a short squeeze,”
LO analyst Adam McCarthy
That makes the source of demand important because a rally driven by forced buying can lose momentum once those positions have been cleared.
Bitget Wallet analyst Lacie Zhang also described recent trading as consolidation with weaker short-term momentum. The next move will depend more on fresh demand once the liquidation-driven boost fades.
Banks keep up the pressure
The Senate vote is only one step in the process, leaving plenty of room for the bill to change. One of the biggest unresolved fights involves stablecoins and whether rewards offered on them could pull deposits away from traditional banks.
The latest draft gives the Treasury secretary authority to restrict rewards if deposit flight becomes substantial. Banking groups remain unconvinced, arguing that the language still leaves room for stablecoin products to compete with interest-bearing deposits.
Coinbase has taken a different approach to that tension. Its agreement with Moov gives community banks access to stablecoin capabilities, potentially giving smaller lenders a way to participate in the market rather than compete against it from the outside.
CEO Brian Armstrong also sees another route if Congress stalls. He said regulators could still deliver more certainty for the industry even without the legislation making it across the finish line.
Then the Fed takes over
The regulatory story is landing just as monetary policy becomes a bigger threat. Goldman Sachs and JPMorgan now expect a 25-basis-point Fed hike this week after hotter inflation and rising oil prices shifted rate expectations.
Higher rates would tighten financial conditions at a difficult time for speculative assets. A stronger dollar could add another headwind for Bitcoin, Ether, and XRP, while rate decisions from the Bank of England and Bank of Japan add more uncertainty to the week.
That leaves crypto caught between two very different catalysts. Progress in Washington could improve the industry’s regulatory outlook, while tighter monetary policy could make investors less willing to take risk.
Bitcoin offers the broadest exposure to that push and pull, while Coinbase, Circle, and Bullish carry more direct sensitivity to regulation. This week could finally bring crypto closer to the rules it has wanted, only for the Fed to make the trade itself harder.