Crypto asset management company Bitwise says the digital asset market is facing a critical fork in the road.
In a blog post on Monday, the investment manager warned that the stalling of the Clarification Act in Congress could tip the market from a speculative bull run to an exhausting “show me” phase.
The Senate Agriculture Committee postponed its cryptocurrency market structure markup hearing from today to Thursday, citing the winter storm that hit much of the United States over the weekend.
Bitwise CIO Matt Hougan said the Clarity Act is critical to solidifying the current regulatory environment supporting cryptocurrencies into permanent law. Without it, the industry remains vulnerable to the whims of future governments.
Hogan noted that sentiment on whether the bill will become law has soured recently. While Polymarket traders projected an 80% chance of the bill passing in early January, that probability has plummeted to around 50% after figures including Coinbase (COIN) CEO Brian Armstrong labeled the current draft as unfeasible.
Armstrong said his company withdrew its support for a comprehensive digital assets bill after finding provisions that could harm consumers and stifle competition.
Hougan believes that if legislation stalls, cryptocurrencies must follow the path of disruptive giants like Uber and Airbnb, which survived regulatory gray areas because they were too popular for lawmakers to ignore.
He suggested the industry has about three years to make stablecoins and tokenized assets an integral part of the U.S. economy; if successful, favorable regulations will surely follow, but if it remains on the edge, changes in Washington could have disastrous consequences.
This legislative uncertainty creates two different pathways for market returns. Bitwise expects Bitcoin to surge higher if a workable version of the Clarity Act is passed, as investors will immediately price in the guaranteed expansion of blockchain finance.
Instead, failure to pass the bill could lead to a “wait and see” market, where price appreciation is limited by regulatory skepticism and hard evidence of real-world adoption. While the asset manager remains optimistic that the government will deliver on its pledge to support cryptocurrencies, it advises investors to prepare for a “slow uptick” while the legislative foundation remains shaky.
Wall Street brokerage Benchmark said failure to pass legislation will delay rather than disrupt the maturation of cryptocurrencies, causing the U.S. market to operate below its potential as investors favor Bitcoin-centric investments, strong balance sheets and cash flow infrastructure over regulatory-sensitive areas such as exchanges, decentralized finance (DeFi) and altcoins.
Read more: Benchmark says delays in market structure bill expected to limit U.S. cryptocurrency valuations