Crypto bill fails in the Senate, 49 to 50

Every week, Amdax summarizes what’s happening in the crypto market for you. Want to dive deeper? Click on the links (if available) in this article for more insights.

Market update

Stay informed in three steps:

1. Bitcoin falls, yields at their highest since 2007
Bitcoin was still above 79,000 dollars on Monday and dropped sharply on Tuesday, closing near 75,700 dollars. The Clarity Act missing the 60 votes came as no surprise, since its chances had been rated low well beforehand. The price slid further once it became official, so the disappointment landed anyway. On top of that came rates. The US ten-year yield climbed above 5 percent, its highest point since 2007, pushed by oil settling at 107.90 dollars after the closure of the Saudi East-West pipeline. Costlier energy lifts inflation expectations, and those expectations pull yields up with them. The Fed decides today. The market is pricing in a 0.25 percentage point increase, the first since July 2023, and the question is whether the Fed goes along or decides not to follow the market rate.

2. The Clarity Act misses the 60 votes
The Senate voted Tuesday afternoon on whether to proceed with the Clarity Act, the bill that would finally bring clarity on supervision in the crypto sector. It needed 60 votes and ended at 49 in favor, 50 against. Not a single Democrat voted yes, including Gillibrand, who had been urging her caucus to back it shortly before. The sticking points remained the same: the rules on crypto held by public officials and the reach of anti-money laundering obligations. On the Republican side, Collins, Hawley and Moran voted no. Just before the vote closed, Thom Tillis turned his yes into a no, which gave him the right to file a motion to reconsider. That keeps another vote possible, though probably not until after November’s midterms.

3. What Revolut, Ledger and Trezor have in common
Last week Revolut received a request for customer data that looked like it came from a government agency. It was fake, and the attacker walked away with passports, addresses and full transaction histories, including those customers’ bitcoin activity. Ledger had a leak at a payment partner in January, Trezor at a shipping partner in August. No crypto was stolen in any of these cases. The keys stayed put and the products did what they were meant to do. What walked out was a list of names, addresses and an indication of who holds how much. The damage arrives later, and indirectly: targeted phishing, counterfeit devices in the mail, and in the extreme case, someone at the door. A data leak works differently than a price move, because it does not go away.

Tim’s take

The Clarity Act was largely priced in already. What you see this week is mostly the effect of the moment itself, and effects like that fade over a longer horizon. What interests me more is how crypto holds up against rising rates. So far bitcoin, like equities, looks fairly unimpressed by a market rate running wild. A Fed that changes direction could change that. In August crypto reacted strongly when the Treasury doubled its buybacks of long-dated debt to 4 billion dollars per operation and the thirty-year yield came down. That is the debasement trade in one line: holding something nobody can print more of. The question I am carrying forward is whether that story holds up when monetary policy tightens with the expected rate hikes.