Bitcoin rebound hinges on US Senate floor vote for crypto market bill

Bitcoin drops 20% in June, ETF outflows hit $4.28 billion

CLARITY Act Senate floor vote seen as market turning point

Bitcoin slid to its lowest level of the year last month, badly denting investor sentiment — but analysts say the current correction may be nearing its end.

The key variable for the second half, markets believe, is whether the US Digital Asset Market Structure Act, known as the CLARITY Act, reaches a Senate floor vote around mid-July. Whether global financial firms including BlackRock can revive flagging investor appetite by rolling out new bitcoin investment products is also drawing close attention.

According to Bloomberg and Kiwoom Securities, bitcoin closed the first half of this year at $58,642, down 20.4% from the end of May. The drop came as news broke that Strategy had sold some of its bitcoin holdings, and as the Federal Open Market Committee wrapped up its meeting in a more hawkish tone than markets had expected, sharply cooling investor sentiment.

Anxiety deepened particularly after Strategy left open the possibility of selling additional bitcoin to fund dividends on its perpetual preferred shares (STRC) and shore up liquidity. US spot bitcoin ETFs recorded net outflows of $4.28 billion last month — the largest monthly net outflow since November last year.

However, analysts argue the recent weakness reflects markets pricing in uncertainty over delayed US legislative timelines rather than any new negative catalyst. Markets had initially expected the CLARITY Act to clear the Senate and be signed into law this year, but enthusiasm faded after no floor vote was scheduled.

Galaxy Research cut its probability of the bill passing this year to 50 percent from 60 percent. On the prediction market Polymarket, the odds of passage this year fell from around 60 percent at the end of May to around 45 percent at the end of June. JPMorgan also recently put the likelihood of passage this year at below 50 percent, citing unresolved issues including the midterm election calendar and controversy over allowing stablecoins to pay interest.

Markets see the biggest inflection point as whether the CLARITY Act is brought to a Senate floor vote after the chamber returns Monday. If the bill reaches the floor, expectations for passage this year could revive and help restore battered investor confidence.

If the schedule slips again, a short-term spike in volatility cannot be ruled out. Some observers also question whether the bill can pass before this year's midterm elections. Jaret Seiberg, a managing director at TD Cowen's Washington Research Group, wrote in a note that July 24 is "in effect the critical watershed," adding that if the bill does not pass before then, "it will be hard to guarantee passage before the midterms in the second half of the year."

Another major wildcard is President Donald Trump's recent declaration that he will not sign any legislation until the voter identification bill passes. That Republican-led measure would require voters to present identification and proof of citizenship at the polls and restrict mail-in voting.

Seiberg said Trump "could make an exception for the CLARITY Act, but the uncertainty is high enough that it could delay the bill's passage." Ethics rules for public officials are also a sticking point: the Democratic Party is pushing to bar senior government officials, including the president, and their families from engaging in digital asset projects.

In addition, whether product diversification aimed at institutional investors can serve as a catalyst for a sentiment recovery is drawing interest. BlackRock last month launched an income-focused ETF (BITA) built around its spot bitcoin ETF, and Goldman Sachs is expected to unveil a similar product this month. Even as legislation stalls, global financial firms continue to expand their bitcoin-based investment offerings.

Shim Su-bin, a researcher at Kiwoom Securities, said that while "legislative delays have dampened investor sentiment, the broader trend of bitcoin's integration into traditional financial markets remains intact," adding that "what matters going forward is whether the expansion of bitcoin investment products translates into improved investor sentiment."

forest@heraldcorp.com