Bitcoin Retreats as CLARITY Act Passage Odds Sink

Bitcoin declined 1.7% since midnight UTC to $76,862 on Tuesday, reversing its late-Monday recovery as Polymarket odds for the U.S. CLARITY Act becoming law this year were cut in half overnight.

BTC had advanced from $75,806.11 to $79,427 on Monday, but the move quickly lost steam. Bitcoin was last at $76,862, leaving it 6.6% below the Sept. 4 monthly high of $82,284. Ether dropped 1.6% to $2,474.76, while Solana lost 2% to $100.43.

The prediction market also turned sharply less optimistic. Polymarket’s odds of the CLARITY Act being signed into law this year rose to 34% Monday before falling to 17%. The decline followed news that Democrats had prepared a counterproposal after rejecting an updated Republican draft circulated on Sunday.

The main point of contention is the bill’s ethics provisions covering crypto holdings by public officials, rather than its market-structure rules.

The Senate is scheduled to vote at 2:15 p.m. ET on invoking cloture, which would force the legislation toward a vote. If it advances, the crypto sector would move closer to obtaining a clear U.S. regulatory framework defining which authorities oversee different areas of the market. A failed effort could leave market-structure legislation on hold until after the November midterm elections.

Selling extended across the wider market. Ninety-two of the 100 assets tracked by the CoinDesk 100 declined, pushing the index 1.6% lower.

The move contrasted with traditional markets. Nasdaq 100 futures rose 0.43%, while S&P 500 futures gained 0.35% as some of Monday’s AI-related losses were recovered. The Dollar Index added 0.17%, indicating that Tuesday’s weakness was largely concentrated in digital assets. The move reversed the previous day, when crypto had been the only major asset class posting gains.

Derivatives Market Remains Cautious

Futures positioning is balanced: The long-short taker-volume ratio remained close to evenly split ahead of the CLARITY Act vote. Total open interest slipped 1% over the past 24 hours to $135 billion, while trading volume surged 54% to $207 billion. This suggests existing positions are being closed faster than fresh positions are being established.

Bitcoin sees taker-driven selling: Marex analysts said bitcoin’s overnight decline toward $77,000 was accompanied by selling from futures takers. These traders execute orders against liquidity already available in the order book. Bitcoin futures open interest remains below 680,000 BTC, pointing to limited appetite for leveraged exposure.

OI falls for major cryptocurrencies: Ether, Solana and XRP futures are also experiencing declining open interest. Solana futures OI recently stood at 58.81 million tokens, the lowest level since May, according to CoinGlass.

CVD remains bearish: Major tokens posted negative 24-hour open-interest-adjusted cumulative volume delta readings. This indicates that sellers are exerting pressure, with a larger share of short-side trades being executed through market orders instead of passive limit orders.

XLM breaks from the market: Stellar’s XLM has been a notable exception. The token has gained 4% over 24 hours, while futures open interest climbed more than 10% to 1 billion XLM. The combination is generally viewed as a sign of long accumulation or bullish positioning. Annualized funding rates remain at a healthy 10%, indicating demand for upside exposure without clear evidence of overheating.

Funding stays mostly bullish: Funding rates remain moderately positive for most major cryptocurrencies, including bitcoin. Ether and SOL have slightly negative readings, pointing to a modest short bias. Should the CLARITY Act vote advance, those short positions could potentially create conditions for a short squeeze. TRX remains an outlier, with deeply negative open interest continuing from previous sessions.

Volatility ticks higher: Bitcoin and ether 30-day implied-volatility gauges, BVIV and EVIV, have moved upward but remain close to recent levels and well below the highs recorded in February and June. The increase indicates a modest rise in hedging demand ahead of the Senate vote.

Calls lead options activity: On Deribit, the implied-volatility curve remains normal and upward sloping, suggesting traders are not anticipating an extreme volatility spike over the next 24 hours. Higher-strike calls account for much of bitcoin’s top-five options volume, while ether displays a similar pattern.

Altcoins Extend Losses

Filecoin’s 27% surge on Monday has also unwound rapidly. The rally was accompanied by a 70% increase in futures open interest, but FIL subsequently fell 5.1% since midnight UTC to $0.89 and was down 13% over 24 hours. Open interest declined 23% to $106 million.

AI and computing-related tokens suffered another weak session after Anthropic CEO Dario Amodei called for a slowdown in AI development over the weekend. Internet Computer fell 6% to $2.58, Theta Network dropped 4.5%, and NEAR Protocol declined 3.7%.

Uniswap bucked the broader DeFi weakness, rising 1% to $6.60 and gaining 4.8% over 24 hours. The token remains one of the DeFi assets with relatively high exposure to the outcome of Tuesday’s vote.

Venice Token continued its retreat after setting a record high last Wednesday on the back of a token burn and short covering rather than sustained buying. VVV fell another 4.5% Tuesday to $22.05 and has now retraced roughly 20%.

The two largest privacy tokens continued moving in opposite directions for a fifth straight session. Monero rose 0.37% to $516.41, while Zcash slipped 1.87% to $1,141.

Cosmos and XDC Network each advanced 1.4%, while Stellar was little changed on the day but remained 4.3% higher over 24 hours.

CoinMarketCap’s Altcoin Season Index stood at 36/100, keeping the market in neutral territory after the gauge reached 51/100 last week before retreating.