CLARITY Act Boosts Bitcoin Outlook – But Analysts See Risks Ahead

Although there’s still a lot of work to be done to become law, the highly anticipated CLARITY Act finally passed the Senate Banking Committee a few days ago, which was a significant step in the right direction.

The effects in the crypto market were immediate but didn’t last long, and analysts at Santiment warned that the rapid narrative shift could still be unsustainable.

CLARITY Act’s Potential Impact

Santiment’s post on the CLARITY Act noted that BTC had seen a “major spike of euphoria across social media” after the Senate advanced the bill in a 15-9 bipartisan vote. The analysts agreed with other experts’ opinion that BTC and the entire crypto industry are now one step closer to getting regulatory clarity in the US.

The CLARITY Act is arguably the most comprehensive piece of crypto legislation in the US, which could answer some really important questions about which assets are considered securities and which are not. As such, any progress on the bill being signed into law should be “considered bullish for crypto (in the long run) because it could finally give the industry clearer rules in the United States.”

Santiment believes one of crypto’s largest issues now, especially in the US, is uncertainty. Companies, legacy investors, and large banks are “hesitant to fully commit because they do not know which crypto assets could later be labeled securities, what rules they must follow, or whether regulators might suddenly crack down on them.”

However, all of that could change in an instant if the CLARITY Act passes. Santiment predicted “more institutional money and powerful players would be expected to enter (or re-enter) the markets” if it becomes law.

Bullish Comments Not Always Great

Although Santiment’s post added that prices will be boosted if the bill is officially signed into law, it warned that this is far from being a reality now, and it could actually cap crypto assets’ progress for now.

“Don’t be surprised, however, if the market values for many top caps get somewhat ‘baked in’ before the CLARITY Act officially gets ruled on.”

Additionally, the analysts explained that the bullish comments rocketed to 1.55 for every 1.00 bearish one after last Thursday’s passage in the Senate Banking Committee. However, such circumstances are not ideal, and Santiment has warned multiple times in the past that when the crowd turns too bullish, they “advise caution” as “markets typically move opposite to the crowd’s expectations at all times.”