Clarity Act Uncertainty Keeps DeFi’s Bigger Market Bet on Hold
Bitcoin has fallen 21% this 12 months, Ethereum is down 33%, and Solana has dropped 37%, based on Bitwise Chief Investment Officer Matt Hougan’s newest CIO memo. Hyperliquid gained 72% in a single month over the identical stretch, a divergence Hougan reads as a preview of what CLARITY Act passage would do to DeFi valuations relative to Bitcoin itself.
The CLARITY Act would draw a proper line between SEC and CFTC jurisdiction over digital property, changing years of enforcement-led regulation with a statutory framework. The House handed the invoice 294-134 in July 2025, with 78 Democrats crossing the aisle, and Senate Banking Chairman Tim Scott pushed it via committee 15-9 on May 14 after practically a 12 months of bipartisan negotiation.
JUST IN:
“Crypto needs the CLARITY Act to undergo,” says Bitwise CIO Matt Hougan.
Polymarket at the moment places the percentages at ~20%.
Hougan says a shock passage would spark a “new main market in crypto,” however its failure means a “extra gradual path” ahead.
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The flooring is a special drawback. Republicans maintain 53 Senate seats in opposition to a 60-vote threshold, and solely two Democrats on the committee backed the invoice, leaving DeFi remedy and stablecoin guidelines as unresolved sticking factors earlier than any full vote.
That uncertainty is doing actual injury to positioning. Hougan’s memo notes institutional capital is sitting out crypto fully in favor of AI equities buying and selling at file highs, a lower-friction guess that doesn’t carry the chance of a regulatory setback touchdown mid-quarter. Crypto ETFs are seeing outflows, and spot volumes sit at multi-year lows, situations that sometimes don’t reverse till the coverage query is definitely resolved by hook or by crook.
“Crypto can survive CLARITY failing or rally if the invoice passes. But it will probably’t thrive within the in-between,” Hougan mentioned within the memo.
The Tokenization Case for Uniswap, Hyperliquid, and Chainlink
Hougan’s memo treats the rotation into idiosyncratic outperformers because the extra attention-grabbing sign than the CLARITY Act headline itself. Hyperliquid’s 72% month-to-month acquire and Zcash’s 50% rise didn’t monitor Bitcoin, Ethereum, or Solana in any respect, which Hougan attributes to fundamentals.
Separate reporting on Hougan’s feedback, by way of Coinpedia, extends that thesis right into a market-size argument for DeFi and infrastructure tokens particularly. Uniswap, Hyperliquid, and oracle community Chainlink at the moment commerce as in the event that they solely ever serve crypto’s roughly $2 trillion whole market.
If tokenization expands as CLARITY’s backers count on, those self same protocols might plausibly begin serving the fairness market – round $150 trillion – or the bond market, nearer to $200 trillion, forcing a repricing of the overall addressable market {that a} compliant Bitcoin ETF merely doesn’t want.
That’s the excellence price sitting with: Bitcoin advantages from any sign of continued U.S. help for crypto broadly, however it doesn’t want new authorized plumbing to perform as a settlement asset. DeFi functions and oracle infrastructure do, since institutional-scale tokenized equities and bonds require the form of SEC-CFTC readability that the CLARITY Act is designed to supply. That’s additionally the place the invoice’s unresolved DeFi-treatment language issues most, and it’s the identical jurisdictional ambiguity delayed SEC-crypto engagement has left hanging over the sector for months.
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What Breaks the Clarity Act Stalemate
If the Senate schedules and passes the CLARITY Act earlier than year-end, Hougan’s framework suggests DeFi and infrastructure tokens re-rate quicker than Bitcoin, since their upside is tied on to a market-size growth Bitcoin doesn’t require. Products already constructed round that thesis, together with Bitwise’s Hyperliquid ETF and a floated Solana ETF, given how a lot tokenized fairness exercise already runs on that chain, would acquire an instantaneous distribution benefit.
If the invoice stalls once more, count on the SEC and CFTC to maintain filling the hole via incremental rulemaking relatively than statute, the identical sample merchants have watched play out throughout Ripple’s own regulatory clarity push.
Hougan’s personal math implies that state of affairs retains institutional capital parked in AI shares and large-cap crypto range-bound, since, per his memo, no sustainable large-cap rally arrives earlier than Congress really settles the query. The Senate’s subsequent scheduling choice, not the eventual vote tally, is what merchants needs to be watching.
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