Bitwise CIO: Crypto can survive CLARITY failure, not the limbo

Bitwise Chief Investment Officer Matt Hougan wrote in a CIO memo that crypto markets could survive the CLARITY Act failing, but they cannot thrive while a full Senate vote leaves regulatory questions unresolved. The memo was published as major crypto assets traded sharply lower and the bill awaited a Senate floor decision.

The CLARITY Act passed the House in July 2025 by 294-134, with 78 Democrats joining Republicans in favor. The Senate Banking Committee advanced the bill on May 14 by a 15-9 margin under Chairman Tim Scott. The legislation would try to draw a clearer line between Securities and Exchange Commission and Commodity Futures Trading Commission jurisdiction and replace enforcement-driven oversight with a statutory framework.

Passage on the Senate floor requires 60 votes. Republicans hold 53 seats and only two Democrats supported the bill in committee, leaving a narrow path to approval. Outstanding issues include how decentralized finance protocols will be regulated and the legal framework for stablecoins, leaving significant uncertainty about the bill’s final shape.

Hougan cited differing odds for passage as a factor keeping institutions out of crypto. He wrote that Polymarket traders price year-end approval at about 51%, while his Washington contacts estimate the chances between 5% and 30%. That spread, he said, discourages large investors from moving capital into crypto products now.

The memo included market data showing broad weakness this year: Bitcoin down about 21% year-to-date, Ethereum down 33%, Solana down 37% and XRP down 31%. Hougan noted crypto-focused ETFs have seen outflows and spot trading volumes are at multi-year lows, making crypto one of the hardest asset classes to trade so far in 2026.

The memo described a rotation from momentum trading to selective, fundamentals-based positions. Hougan highlighted tokens that gained on idiosyncratic factors: Hyperliquid rose about 72% in a month and Zcash climbed roughly 50%, moves he tied to revenue or technical developments specific to those projects.

“Crypto can survive CLARITY failing or rally if the bill passes. But it can’t thrive in the in-between,” Hougan wrote in the memo. He added that investors can buy other high-performing tech stocks instead of risking a regulatory setback within months.

Hougan also said the bill could materially affect crypto valuations once Congress settles the rules, but he does not expect a sustained large-cap rally before lawmakers resolve the outstanding questions. He flagged Senate scheduling choices in the coming weeks as likely to move prices by changing when regulatory risk would be resolved.

The CLARITY Act’s fate and its market effects remain uncertain while senators continue negotiating provisions and no full Senate timetable has been set.