Bitwise Says CLARITY Act Could Mark Crypto’s Bear Market Bottom
Bitwise says approval could bring more clarity around the SEC and CFTC, while stablecoins and DeFi may get an added boost.
Key Takeaways
- Bitwise says the CLARITY Act could be a major Q3 catalyst for crypto and thinks approval may mark the bottom of the bear market.
- The bill is still bogged down by ethics debates tied to the president's family and Section 604, which would shield non-custodial developers.
- Bitwise also expects more stablecoin activity, is watching the Fed closely, and sees DeFi showing relative strength versus Bitcoin.
Bitwise says the CLARITY Act could be one of the biggest forces shaping the crypto market in the third quarter, and the firm believes approval would likely coincide with the bottom of the current bear market. The asset manager says this quarter is a critical stretch for the bill, which it sees at a turning point.
Bill Keeps Getting Stuck
The CLARITY Act, formally known as the Digital Asset Market Clarity Act, is designed to set up a federal framework for crypto and spell out the division of authority between the SEC and CFTC. That clarity is exactly what makes the bill so important for the industry, but it also makes the legislation politically sensitive. Bitwise says two issues are doing most of the damage right now: ethics language tied to the crypto holdings of the president's family and the fight over Section 604, which would protect non-custodial developers from money transmitter rules.
The market's odds of the bill passing in 2026 are now around 40 percent on prediction markets. That is down sharply from 75 percent in mid-May, underscoring how quickly sentiment has cooled.
More Than Just Regulation
Bitwise says the bill matters for more than just market structure. It also sees the CLARITY Act as a potential boost for institutional adoption, since clearer rules could make it easier for companies to use crypto or launch products around it.
That view lines up with a quarter in which stablecoins are back in the spotlight. Regulators are expected to finish the rules under the GENIUS Act this quarter, even though the law itself does not take effect until January 2027. Bitwise expects more big names to announce stablecoin plans before then, and points to OpenUSD, which is backed by Stripe, BlackRock, Visa, Coinbase, and about 140 other companies.
Bitwise Sees Multiple Catalysts
Outside of regulation, Bitwise is also watching the Federal Reserve under Chair Kevin Warsh. Rates have stayed on hold so far, and the market still does not have a clear sense of his next move. The firm says any rate decision could have broad effects across risk assets.
Bitwise also points to a quiet re-rating in DeFi. Over the past month, Bitcoin dropped about 22 percent, while the firm's DeFi index fell only 4 percent. Bitwise says that stands out because DeFi usually swings more sharply than Bitcoin. The asset manager thinks that relative strength could continue in Q3, even if the timing is still hard to pin down.
The outlook comes after a rough second quarter, which marked crypto's third straight losing quarter and the worst stretch since 2022. For investors in Europe, the bigger takeaway is that U.S. legislation on market structure and stablecoins does not stay confined to Washington. If the rules become clearer in the U.S., that could also influence how major players around the world think about crypto infrastructure. In Washington, the debate over Section 604 is still ongoing as well, with the provision meant to protect non-custodial developers from money transmitter rules.
