With rate hikes, the CLARITY Act stalled, and the four witches’ day stacking on top, what the market is trading this week isn’t the news itself, but the gap in expectations.
This week’s market delivered a seemingly contradictory outcome:
The Federal Reserve raised rates, and the CLARITY Act still couldn’t be advanced—but the crypto market didn’t keep falling; instead, it rebounded quickly in the second half of the week.
So is the market ignoring bad news, or is it trading an entirely different set of logic?
—let’s first look at what happened this week
On Tuesday, the U.S. Senate failed to move forward with the CLARITY Act, with a procedural vote falling short 49–50. After the announcement, Bitcoin briefly dipped to around $75,000.
On Wednesday, the Fed raised rates by 25 basis points, bringing the range to 3.75%–4.00%. This is the Fed’s first rate hike since 2023.
By Friday, Bitcoin has regained the $80,000 level; the 24-hour gain is close to 6%. Ethereum and some altcoins are performing even stronger.
On the surface, the market has suffered two major pieces of bad news in a row, yet prices still put in a pattern of falling first and then rising.
—Why didn’t the bad news continue to intensify?
First, rate hikes have already been priced in by the market.
Before the Fed officially announced its decision, the market had already been continuously pricing in rate-hike expectations. So when the 25 basis points were actually implemented, the result didn’t come in meaningfully above expectations.
What the market cares about now isn’t whether there will be a rate hike this time, but whether there will be a sequence of rate hikes afterward, and whether rate hikes will noticeably hurt the economy and liquidity.
If the outcome isn’t worse than expected, some capital may actually come back and buy the assets that were previously sold off.
Second, the bill being blocked doesn’t mean regulation has ended.
What failed this time with the CLARITY Act was the procedural push, and it doesn’t mean the bill is permanently rejected. The bill has indeed faced political resistance; the timeline for the regulatory framework to be implemented may continue to be delayed, but U.S. crypto regulation hasn’t completely stopped as a result.
The regulatory timeline is slowing down, increasing uncertainty, but the market hasn’t interpreted it as the crypto industry losing its long-term development space.
—Quadruple witching amplified this week’s volatility
On Friday, it coincides with the quarterly quadruple witching day (Quadruple Witching).
Quadruple witching refers to the trading day when stock options, index options, index futures, and single-stock futures all converge and expire. It usually brings higher trading volume, shifts in fund positioning, and intraday volatility.
It doesn’t affect the crypto market directly; more often it transmits indirectly through U.S. stocks, index futures, and overall risk appetite.
Therefore, quadruple witching is more like an amplifier of market moves rather than the engine of the rally. It may have amplified the market’s reversal on Friday, but it can’t independently explain why Bitcoin is rising.
What truly drives the rebound is also the positioning structure.
After the bad news was released, earlier long positions were flushed out, and leverage fell. When prices didn’t keep breaking below key levels, shorts began covering—pushing prices up quickly.
So this rally isn’t “bad news suddenly turning into good news”; rather, expectations have already been digested, selling pressure has temporarily waned, and then shorts covering adds to the move.
—After the rebound, what should we watch?
This rally suggests that long positions are still getting support, but it doesn’t mean the rate-hike bad-news catalyst has disappeared. The Fed’s year-end rate median points to 4.1%; another rate hike within the year is still possible.
Next, focus on inflation, employment, and U.S. Treasury yields: if the data cools, the rebound could continue; if inflation keeps bouncing and rate-hike expectations heat up, the market will still face pressure.
So, this is more like a repair after bad news has been realized, rather than a confirmed start to a new round of gains. The quadruple witching day amplified this week’s volatility; the subsequent trend still needs to be watched.