Clarity Act, US, and Japan interest rates were all bad news… but Bitcoin didn't collapse.

Bad news poured in, but Bitcoin reclaimed $80,000… Why the market endured

▲ US, Japan, cryptocurrency regulation, Bitcoin (BTC)/AI generated image ©

Despite a series of negative developments, from the failure of the Clarity Act, a US cryptocurrency market structure bill, to pass a Senate procedural vote, to the simultaneous interest rate hikes in the US and Japan, Bitcoin (BTC) climbed back above $80,000. Along with the analysis that a significant portion of the shock anticipated by the market had already been priced in, Bitcoin's resilience, which did not collapse despite successive headwinds, emerged as a new point of interest.

According to crypto media outlet Cryptopotato on September 20 (local time), Bitcoin plummeted by $5,000 in a single day, from $80,000 to a multi-week low of $75,000, immediately after the Clarity Act failed to pass a Senate cloture vote last week. Following the vote, more than 23,000 Bitcoins in a loss-making state moved to exchanges, which CryptoQuant assessed as a signal for a massive sell-off. However, BTC later recovered a significant portion of its losses, at one point surpassing $81,000.

The monetary policy environment was also not favorable for Bitcoin. The US Federal Reserve (Fed) raised its benchmark interest rate target range by 0.25 percentage points to 3.75-4.00%, marking the first rate hike since July 2023. With inflation remaining high, policymakers maintained a hawkish stance, leaving open the possibility of further rate hikes within the year. High interest rates are considered a burden for Bitcoin, as they increase the competitiveness of income-generating assets and tighten financial conditions.

In addition, the Bank of Japan (BOJ) also raised its interest rate by 0.25 percentage points on September 18, bringing it to 1.25%, the highest level in 31 years. As Japan has long offered globally low interest rates, monetary tightening is a variable that could affect global liquidity and carry trades. Despite the triple whammy of the Clarity Act's failed vote and interest rate hikes by the Fed and BOJ, Bitcoin quickly rebounded after being pushed down to $75,000.

The possibility of pre-emption was suggested as the reason why the negative news did not lead to as big a shock as expected. It was explained that the market had largely anticipated the Fed's interest rate hike even before the meeting, and the possibility of the Clarity Act's vote failing was also already priced in. Even immediately after the BOJ's interest rate hike, the yen did not immediately strengthen. Bitwise CIO Matt Hogan analyzed that crypto prices had risen significantly even while the likelihood of the Clarity Act passing decreased, suggesting that the recent recovery was not solely dependent on a single bill. Crypto Dan also assessed that on-chain flows are gradually becoming similar to the transition phase out of past bear markets.

However, the media's analysis suggests it is too early to conclude that a new bull market has begun based solely on this rebound. First, stably defending $80,000 is the initial test, and then $81,700 must be decisively breached. Cryptopotato pointed out that only after these two price levels are reclaimed and a supportive trend is confirmed can the possibility of a new bull run for Bitcoin be discussed.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*