Bitwise CIO Hougan revises Clarity Act outlook, says crypto bull market may continue without legislation

Bitwise Chief Investment Officer Matt Hougan no longer believes the Clarity Act's failure is likely to bring several weeks of difficult crypto markets.

The Clarity Act received 49 votes in Tuesday's Senate procedural vote, falling short of the 60 needed to advance. "But I no longer think that's the most likely path," he wrote in a note to clients late Wednesday. "Instead, I suspect Clarity's failure may matter far less than today's headlines suggest."

Hougan pointed to bitcoin's (BTC) rally since July 1, when it bottomed at around $57,950. Bitcoin climbed above $80,000 by Sept. 4, while Polymarket's odds of the Clarity Act becoming law this year fell from 39% to 14% over the same period. "If the bull market depended on Clarity's passage, you would have expected falling odds to mean falling prices. We got the opposite," he wrote.

SEC and CFTC rulemaking

Hougan reasoned that Wall Street firms have continued expanding their crypto businesses without waiting for the Clarity Act. He cited Robinhood launching its own blockchain, Morgan Stanley launching a Solana exchange-traded fund, and DTCC settling its first batch of tokenized stock trades. "These firms (and others) took comfort in the fact that we have an extraordinarily pro-crypto SEC and CFTC in place until 2029," the Bitwise CIO said.

Crypto has been in a "heads we win big; tails we still win" scenario on regulation, Hougan argued, though he expects the current market weakness to last until the regulators announce their next proposals.

SEC Chair Paul Atkins has said the agency is prepared to address issues covered by the Clarity Act through its own rules. CFTC Chair Mike Selig has also said the agency is ready to move ahead with its own crypto rulemaking.

However, Hougan acknowledged that agency rules can be reversed by a future administration, that only Congress can give the CFTC broader authority over spot crypto markets, and that the Clarity Act would have provided more durable regulatory certainty.

Bitcoin fell about 4% following the news, with Hougan pointing to concerns about interest rates and oil as possible contributing factors. "The bull market ahead of us has a few more speed bumps," he wrote.