Has Bitcoin Bottomed? Grayscale Spotlights Impact of CLARITY Act, Fed Decision

Bitcoin’s recent pullback seems to be far from done, and the next significant move will likely be dictated by two factors in the U.S. These include the CLARITY Act’s regulatory progress and Fed’s monetary policy, according to Grayscale’s head of research, Zach Pandl.

Inside Grayscale’s Report On Bitcoin & Crypto Bear Market

Recently, Bitcoin had dropped below $60,000, signaling the start of a tough correction, said Pandl in the report, which is titled “Two Scenarios for the Bitcoin Bear Market.” The BTC price is down by more than 50% from its $125,000 all-time high in October. However, he argued that the decline still resembles previous market cycles rather than a structural breakdown.

Pandl pointed to macroeconomic and crypto-specific factors. The big change has been in expectations for the U.S. Federal Reserve, which saw President Donald Trump nominee Kevin Warsh becoming the Fed Chair instead of the more dovish Kevin Hassett. Moreover, inflation is surging and markets are now pricing in rate hikes instead of rate cuts.

In addition to monetary policy, Pandl noted three other headwinds. These include uncertainty around the CLARITY Act in the U.S. Senate and concerns about the leveraged balance sheet of Strategy. Further, investor wariness of potential quantum computing threats to the security of digital assets is weighing on the Bitcoin market.

Those risks do not detract from Grayscale’s long-term view of the fundamentals of the industry. Pandl mentions that factors driving change include expanding institutional participation, the continued development of stablecoins and tokenized assets and regulatory progress favoring blockchain adoption.

Also, previously, he suggested that Strategy selling $3 billion in Bitcoin could restore market confidence in MSTR, STRC stocks. However, economist Peter Schiff has warned that such a move could crush the Bitcoin market.

What’s Next For BTC Price?

Meanwhile, Grayscale’s report foretells two future cases for Bitcoin. “In our baseline scenario, the CLARITY Act clears the US Senate, Strategy takes steps to shore up its balance sheet, and the Fed holds off on rate hikes,” Pandl wrote. He added that if those catalysts develop, “Bitcoin’s price may be already close to its low.”

The downside case assumes “the CLARITY Act does not pass this year, Strategy and other DATs deleverage further, and the Fed is forced to raise rates due to persistent inflation.” Under those conditions, Pandl said Bitcoin could “fall moderately further.” Nonetheless, he pointed out that this cycle will probably not experience the 80% peak-to-trough declines observed in the past in bear markets due to higher institutional demand.

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