The core inflation data released in the past week in the United States came in above market expectations. Coupled with international oil prices holding steady above $100, concerns about persistent inflation are steadily growing, and market expectations for additional rate hikes by the Federal Reserve within the year have noticeably increased. This is a confirmed macro variable change that is currently suppressing risk assets. Against this backdrop, Bitcoin (BTC) and Ethereum (ETH), however, have strengthened against the trend, outperforming most US stock risk assets, indicating that market expectations for positive developments in the crypto sector are heating up.
The key crypto-sector event that has already been confirmed is that the US Congress is about to vote on the (CLARITY Digital Assets Regulatory Act). The bill clearly defines the regulatory authority split between the SEC and the CFTC over crypto assets. Previously, the market widely expected that the enactment of this bill would eliminate uncertainty in crypto regulation, and it has been an important support for the recent strength in BTC and ETH.
The first key observation point ahead is the result of this week’s CLARITY Act vote. If the bill passes smoothly, the market has already fully priced in the earlier expectation of “a regulatory positive outcome,” which could instead easily trigger sell-the-fact pressure. The ETH whose price is more affected by SEC regulatory disputes may see even more pronounced volatility. If the vote is blocked, concerns about regulatory uncertainty will rise again, suppressing risk appetite for crypto assets.
The second key observation point is the FOMC interest rate decision that follows immediately and Powell’s press conference. If the Federal Reserve releases hawkish signals—suggesting there could still be rate hikes within the year—combined with a strengthening US dollar, it would further weigh on the prices of risk assets including BTC and ETH. If instead the remarks are more dovish and acknowledge that progress on inflation coming down is in line with expectations, it may offset some of the selling pressure coming from the regulatory side.
At present, neither the on-chain activity of BTC and ETH nor exchange holdings have shown any extreme fluctuations, indicating that the market has not yet made extreme pricing for the two events above. In the short term, volatility is more a reflection of expectation-driven gaming rather than deterioration in the fundamental condition of crypto assets. Going forward, the focus should be on changes in capital flows after the two milestones land, to avoid making extreme moves guided by short-term sentiment.