Bitcoin Slumps as US Regulatory Hopes Crushed, Fed Hike Looms

Crypto markets are facing renewed pressure after the US failed to advance a key regulatory Bill. The Clarity Act, which had been under consideration for over a year, was seen as having a low chance of progressing in the Senate this week amid political wrangling.

Investors had been looking to the Bill to help the market break out of an 11-month malaise. However, its failure has added additional headwinds in the short term for a move up in Bitcoin, said Pratik Kala, a portfolio manager at digital-asset hedge fund Apollo Crypto.

The looming Federal Reserve interest-rate hike is also weighing on crypto markets. Markets are pricing a better than 90% chance of a 25 basis-point hike, and inflation fears and soaring US bond yields could further damp demand for risk assets like Bitcoin.

More than $540 million in bullish bets on cryptocurrencies were unwound in the last 24 hours, according to Coinglass data. Institutional demand weakened, with US-listed spot Bitcoin exchange-traded funds seeing more than $450 million in net outflows on September 15, the largest single day of withdrawals since June.

Despite this, positioning in Bitcoin showed some resilience. There are more bets on the original cryptocurrency to rise than to fall, according to data on Deribit. Roughly $1.7 billion in calls were held at the $80,000 level across all maturities, the data showed.