Bitcoin Technicals, Regulation Signals Strong Despite Clarity Act's Failed Vote

SPEAKER_1 (0:00)

Adam Lynch is back with us, Director of Equity Research, Charles Schwab. So, it came and it went.

The Clarity Act was a no-go. This procedural vote, as many anticipated, it might not go through. Some even said dead on arrival, but there were others who thought that it may have had some bipartisan support. What's a you now, two days later?

Adam Lynch (0:25)

Yeah. Hi, Nicole. It's great to be back. The whole situation has me harkening back to an old hall in Oatsong, so close yet so far away.

I think we had made some great progress, and I had some hope that it could get done. We had obviously a procedural vote that failed, and so now we're stuck with zero passage. We could have been handing the CFTC primary authority over these assets, establishing the first comprehensive regulatory framework, but 49 to 50, we lost.

The Democrats essentially cited those ethical concerns tied to President Trump and some of his investments, as well as national security provisions. The failure triggered an immediate sell-off. Bitcoin dropped I think about 5 percent, while some of those crypto related stocks like Coinbase and Circle, dropped more than 10 So yeah, it's a bit of a disappointment and we'll have to see where we go from here.

SPEAKER_1 (1:22)

Bitcoin and Ethereum are higher today.

I mean, it could have been atrocious where you just saw continued selling and selling upon selling and that doesn't seem to be the picture at all. So what's next now for crypto?

Adam Lynch (1:35)

Yeah, exactly, Nicole. I think overall, I'm pretty optimistic in terms of what we've seen. We've been holding pretty strong. Not only did we have that failure in the legislation, but we also had the rate hikes. So we've had this double whammy this week, and we're just down to 75, 76k or so. Still well off those lows that we hit back in late June, early July.

It's been a rough week for some of the fun flows, right? The spot BTC and Ether ETFs, they've lost about $1.2 billion just on Tuesday and Wednesday alone. So it's been a rough week for some outflows, but overall, I think we're in a pretty decent position. Some strong technical signals out there. We had Bitcoin hit that golden cross last week. So we'll see.

SPEAKER_1 (2:24)

The golden cross on Bitcoin, and that was something I was going to ask you about. So I'm glad you mentioned that. The technical analysis is still looking pretty good in the big picture.

Also, just the underlying story of why people like crypto in the first place, right? The DeFi, getting away from fiat currency. Is that still very much a trend?

Adam Lynch (2:43)

Yeah, I would say so.

I mean, I've even heard a bit of chatter from some of the real, you know, hardcore Bitcoin bulls. They didn't even want legislation, right? Some of the folks still want it to be this kind of standalone, keep it away from government, that sort of argument. And those folks, I guess, would be happy here. But I think having some guardrails would be good for the industry. We want to see this stuff get a little bit more legitimized. We want it to be more involved in institutional investing. And in order to get there, we do need to have something.

SPEAKER_1 (3:14)

The rules that are coming now, I mean, the SEC and the CFTC are still very much in play here, keeping a watchful eye. So there won't be law, you know, we won't have that legislation. But in fact, we will have some sort of rules, right? And that might be helpful.

Adam Lynch (3:29)

Yeah, for sure. And they've already started to step up. This SEC and the CFTC have been saying for weeks now, you know, if clarity fails, we'll still be here to create some rules. So the SEC has already stepped forward. They issued some guidance today, clearing the way for some tokenized versions of stocks to trade. They came out with like a five year exemption for those types of products so that they're not labeled as exchanges, I believe what the bill is going to do. So that could be huge.

Paul Atkins has stepped forward and say, we're going to act with or without this legislation to deliver certainty. So hopefully, we'll start to see the CFTC start to follow.

Then we've already had that strategic Bitcoin Reserve Bill, advanced in the house yesterday. That could be a huge first step for just getting the first federal committee to move forward with some of that legislation. So hopefully, yeah, we'll still see some rules and then maybe something going on with the house with that strategic Bitcoin Reserve Bill.