The digital asset market is facing a critical fork in the road, according to crypto asset management firm Bitwise.
In a blog post on Monday, the investment manager warned that the stalling of the Clarity Act in Congress could move the market from a speculative bull to a grueling “show me” phase.
The Senate Agriculture Committee postponed its hearing on marking up the crypto market structure from today until Thursday, citing the winter storm that hit much of the United States over the weekend.
According to Bitwise CIO Matt Hougan, the Clarity Act is critical to cementing a current pro-crypto regulatory environment into permanent law. Without it, the industry remains vulnerable to the whims of future administrations.
Hougan pointed out that market sentiment on whether the bill will become law has soured recently. While Polymarket traders in early January were pricing in an 80% chance of the bill passing, those odds have plummeted to around 50% after figures like Coinbase (COIN) CEO Brian Armstrong labeled the current draft unworkable.
Armstrong said his company withdrew support for a comprehensive digital assets law after finding provisions that could have harmed consumers and stifled competition.
Should the legislation stall, Hougan argued that crypto must follow the path of disruptive giants like Uber and Airbnb, which survived regulatory gray areas by becoming too popular for lawmakers to ignore.
He suggests that the industry has about three years to make stablecoins and tokenized assets indispensable to the US economy; if it succeeds, favorable regulations will follow of necessity, but if it remains on the fringes, a change in Washington could prove disastrous.
This regulatory uncertainty creates two distinct paths to market returns. Bitwise expects a strong recovery if a workable version of the Clarity Act is passed, as investors will immediately price in the guaranteed expansion of blockchain funding.
Conversely, failure to pass the bill is likely to result in a “wait and see” market where price growth is limited by regulatory skepticism and contingent on hard evidence of real-world implementation. While the asset manager remains optimistic that the administration will deliver on its pro-crypto pledges, it advises investors to prepare for a “slower ascent” if the legislative foundation remains unclear.
Wall Street brokerage Benchmark said failure to pass legislation would delay, not derail, crypto’s maturation, leaving the US market operating below its potential as investors prefer bitcoin-centric exposure, strong balance sheets and cash flow infrastructure to regulatory sensitive segments such as exchanges, decentralized finance (DeFi) and altcoins.
Read more: Delayed market structure that has seen a cap on US crypto valuations, says Benchmark
