Bitcoin, which has been sliding, is prompting talk of a bottom. According to Bloomberg and Kiwoom Securities on the 5th, Bitcoin ended the first half of the year’s final trading at $58,642, down 20.4% from the end of May. Last month, it sank to its lowest level of the year, freezing investor sentiment. Even so, the market is increasingly interpreting this correction as nearing its end. The basis for that view lies not in the price chart, but in Washington, D.C.
◆ Three reasons Bitcoin fell 20% in a month
Last month’s decline was driven by three overlapping negative factors. The origin was Strategy. The company, the world’s largest publicly listed holder of Bitcoin, built its strategy around buying Bitcoin with corporate funds. When news broke that the company, which had insisted it would “never sell,” had board approval to sell up to $1.25 billion worth of Bitcoin, the market was shaken. The stated reason was to fund dividends on its perpetual preferred shares (STRC) and secure cash, but the very signal that a heavyweight might turn into a seller heightened anxiety.
Strategy also took steps to reassure the market. It reportedly sold common shares in the open market to build more than $2.5 billion in dollar reserves, and earmarked that money solely for dividend and interest payments. It also raised the annual dividend rate on STRC to 12%. Even so, analysts say the symbolism of abandoning the “hold at all costs” principle had a greater impact on prices.
The Federal Reserve, the U.S. central bank, also poured cold water on the market. Last month’s Federal Open Market Committee (FOMC) meeting ended more hawkishly than expected. “Hawkish” refers to a stance that is cautious on rate cuts in order to curb inflation. When interest rates stay high, assets like Bitcoin, which do not pay yield, become relatively less attractive.
Money flows also reversed direction. Bitcoin spot exchange-traded funds (ETFs), which allow the asset to be bought and sold like stocks, saw $4.28 billion in outflows last month, the largest monthly net outflow since November last year. That suggests both retail and institutional investors pulled back.
◆ The real variable is Washington… Why the Clarity Act matters
But some in the market see the decline differently. Their view is that rather than a new shock, the price had already been reflecting uncertainty caused by delays in the U.S. legislative schedule.
The key is the U.S. digital asset market structure bill, commonly called the “Clarity Act.” It would define by law whether virtual assets such as Bitcoin are securities or commodities, and whether oversight should fall to the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). Once the standards are set, market participants expect regulatory uncertainty to ease and open the door for large pools of capital such as pension funds. The bill passed the House last July, but in the Senate it remains stalled without a set date for a floor vote. Among the three major U.S. crypto bills, the Genius Act, which deals with stablecoins, has already been enacted. Since the remaining key piece is the Clarity Act, which would establish the rules for the entire market, all eyes are on it.
The fading expectations are visible in the numbers. Research firm Galaxy Research cut its estimate for passage this year from 60% to 50%. On prediction market Polymarket, the same probability fell from around 60% at the end of May to around 45% at the end of June. Investment bank JPMorgan put the odds below 50%, citing remaining issues such as the midterm election schedule and debates over stablecoin interest payments.
The next turning point is midmonth. If the Senate returns on the 13th and the bill is brought to the floor, expectations for passage this year could revive and investor sentiment may recover, observers say. Jaret Seiberg, managing director of TD Cowen’s Washington research group, said in a report that the 24th is effectively the key inflection point, and if the bill is not passed before then, it will be difficult to guarantee action before the November midterm elections.
Political variables are also intertwined. President Trump has said he will not sign any other bill until legislation requiring voter ID at the polls is passed. Seiberg said the Clarity Act could be treated as an exception, but added that the uncertainty may still delay progress. Democratic efforts to impose ethical rules barring the president, other senior officials, and their families from crypto-related business remain another point of contention.
◆ Even if the law stalls, Wall Street keeps building products
Another reason behind the bottoming-out view comes from Wall Street. Even as legislation is delayed, major financial firms continue rolling out Bitcoin investment products. BlackRock, the world’s largest asset manager, launched BITA last month, an income-focused ETF that aims to generate regular cash returns using Bitcoin spot ETFs. Goldman Sachs is also reported to be preparing a similar product this month. The trend of traditional finance placing Bitcoin on its product shelves has not been broken, even before regulation is finalized.
Kiwoom Securities researcher Shim Soo-bin said that while delayed legislation has dampened investor sentiment, the broader trend of Bitcoin being incorporated into traditional financial markets remains unchanged, and the key question now is whether the expansion of investment products will help restore sentiment.
Of course, the opposite scenario remains possible. There is also growing caution that if floor consideration is delayed again, short-term volatility could rise. In the end, Bitcoin’s direction in the second half of the year is likely to be written first on the Senate schedule rather than the price board. After the 13th, Washington’s answer is expected to determine the next destination for a price stuck in the $58,000 range.