Crypto Volatility to Stay High as Fed, CLARITY Failure Weigh on Markets

Crypto volatility is likely to remain elevated as investors weigh the Federal Reserve’s monetary policy decision and the CLARITY Act’s failure to advance in a key Senate procedural vote, according to Simon-Peter Massabni, head of business development at XS.com.

Bitcoin (CRYPTO: $BTC) fell more than 2.5% to around $75,600 on Tuesday, while Ethereum (CRYPTO: $ETH), Solana (CRYPTO: $SOL), Cardano (CRYPTO: $ADA) and Dogecoin (CRYPTO: $DOGE) also traded lower.

The Senate’s failure to advance the CLARITY Act was a majoring well short of the 60 votes required to move the legislation forward. The bill aims to establish a federal framework for digital assets and clarify the regulatory roles of the Securities and Exchange Commission and Commodity Futures Trading Commission

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The broad decline also came as investors reduced exposure to riskier assets amid higher U.S. Treasury yields. The 10-year Treasury yield briefly moved above 5%, significantly “increasing the opportunity cost of holding non-yielding assets, including much of the cryptocurrency market.”

At the same time, oil prices above $100 a barrel, geopolitical tensions and the prospect of tighter monetary policy are adding to the pressure on risk assets. “Volatility could remain elevated,” Massabni said, pointing to the combination of monetary policy, regulation and geopolitical risks facing the market.

Ryan Kirkley, co-founder and CEO of Global Settlement Network, also noted that the Senate’s failure to advance the CLARITY Act immediately weighed on crypto markets, with crypto-linked stocks such as Coinbase (NASDAQ: $COIN) and Circle (NYSE: $CRCL) coming under pressure.

“The reaction tells us exactly how much value investors have already attached to regulatory certainty,” Kirkley told Cryptoprowl, adding that institutional capital needs to know “who regulates what, how assets are classified, what intermediaries can do and where the SEC and CFTC sit. When those answers get delayed, capital has to price that uncertainty.”

Source: finance.yahoo.com