Bitcoin rose above $84,000 during Monday’s morning session, gaining about 5% just days after the Senate failed to advance the CLARITY Act and the Federal Reserve raised its benchmark interest rate for the first time since July 2023. Arthur Hayes argues that the sequence of events suggests regulation was not the key driver behind the latest move.

Hayes, the CEO of Flop Labs, described the stalled legislation as “nonsense” in an X post last week. He argued that the crypto market did not need the CLARITY Act and instead pointed to monetary conditions as a potential source of the rally. Hayes said higher rates can increase income for wealthy investors, with some of that additional liquidity potentially finding its way into financial assets.

Bitcoin has gained more than 8% over the past week, while the move above $84,000 has renewed speculation that the recent decline may have established a market floor and that a broader recovery could develop in the fourth quarter of 2026.

Fed Decision and CLARITY Act Vote Overlap

The Senate’s CLARITY Act vote and the Fed’s rate decision occurred within roughly 24 hours, leaving room for different interpretations of what drove Bitcoin higher. Senators voted 49-50 against advancing the bill last Tuesday, well below the 60 votes required to invoke cloture.

The next day, the Federal Open Market Committee voted 12-0 to raise the federal funds target range by 25 basis points to 3.75%-4%. The decision marked the central bank’s first rate increase in more than three years.

Hayes’ Liquidity Argument

Hayes contends that higher interest rates can lead investors to hold more cash, but he also argues that increased interest income can strengthen the financial position of wealthy asset holders. Some of that capital, he suggests, could subsequently move into Bitcoin and other financial assets.

Grayscale’s Zach Pandl has presented another interpretation. He compared the latest rate hike with the Fed’s one-time increase in March 1997, which did not interrupt the Nasdaq’s broader bull-market trend.

Pandl expects the rate increases projected through 2026 to have a relatively modest effect on capital allocation. He also noted that higher cash yields could benefit stablecoin issuers and potentially encourage additional flows into tokenized assets.

Bitcoin’s rebound occurred within 48 hours of the failed CLARITY Act vote and the Fed’s rate increase. While the timing aligns with Hayes’ liquidity thesis, it does not establish that monetary policy was solely responsible for the price recovery.

Coinbase CEO Brian Armstrong expressed disappointment over the Senate vote and highlighted the political effort surrounding the legislation. Despite Bitcoin’s gains, Stocktwits data showed bearish retail sentiment, illustrating that rising prices do not always coincide with stronger investor confidence.

Bitcoin’s next major price level is $85,000. A move above that threshold could put $87,000-$88,000 in focus, where a concentration of short liquidations may increase the potential for a squeeze. If Bitcoin falls below $83,500, attention could shift toward $80,000, an area associated with significant support and long-liquidation interest.

Trading activity has also picked up with the price rebound. CoinGecko reported daily transaction volume of $85.6 billion, up from $72.4 billion the previous day.