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(Bloomberg) -- Cryptocurrencies faced renewed pressure on Wednesday after the US failed to advance a key regulatory bill, bruising industry sentiment just ahead of a potential interest-rate hike from the Federal Reserve. Bitcoin stabilized at around $75,900 in early New York trading after falling as much as 5% in the previous session. The broader cryptocurrency market remained following steep declines a day earlier. Investors had been looking to the Clarity Act — a crypto market-structure bill that had been under consideration for over a year — to help the market break out of an 11-month malaise, even as the bill was seen as having a low chance of advancing in the Senate this week amid political wrangling. Now inflation fears and soaring US bond yields are expected to push Fed Chairman Kevin Warsh to raise rates on Wednesday, which could further damp demand for risk assets like Bitcoin. The inability to move Clarity forward “adds additional headwinds in the short term for a move up in Bitcoin,” said Pratik Kala, a portfolio manager at digital-asset hedge fund Apollo Crypto. “Until investors gain more certainty on the path of rates globally, risk assets would remain under pressure,” he added. Over $540 million in bullish bets on cryptocurrencies were unwound in the last 24 hours, according to Coinglass data. Institutional demand weakened as well, with US-listed spot Bitcoin exchange-traded funds seeing more than $450 million in net outflows on Tuesday, the largest single-day withdrawals since June. “The failure to advance the Clarity Act is undoubtedly a setback for the US digital asset industry, but it looks more like another delay than the end of the road,” said James Butterfill, head of research at CoinShares. “For markets, this is incrementally negative rather than a major shock.” Positioning in Bitcoin showed some resilience. There are more bets on the original cryptocurrency rising than falling, according to data from Deribit. Roughly $1.7 billion in calls were held at the $80,000 level across all maturities, the data show. Industry executives were quick to express frustration over the failed Senate vote on Tuesday, as it was meant to lend legitimacy to crypto as it further integrated into Wall Street. In posts on X, Ripple Labs Chief Executive Officer Brad Garlinghouse called for a post-mortem looking at why the bill failed, while Coinbase Inc. CEO Brian Armstrong said the industry could no longer wait on Congress. Both pointed to the Securities and Exchange Commission and the Commodity Futures Trading Commission as capable of providing a clear regulatory framework in the absence of legislation. However, agency rules could prove easier for a future administration to change. “This points to the larger challenge ahead,” said Samson Leo, chief legal officer at the Singapore-based stablecoin issuer StraitsX. “The longer major markets operate without clear and compatible frameworks, the harder it becomes to address fragmentation.” But the immediate focus is now on the Fed, with markets pricing in a better-than-90 % chance of a 25-basis-point hike, swap data show. “Market turmoil is to be expected across all asset classes if Warsh fails to hike rates,” said Caroline Mauron, co-founder of Orbit Markets. She added that inflation concerns could revive the debasement trade, which is positive for Bitcoin, but “bond yields mayhem and general market volatility will probably take it down first before it goes up.” Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
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