The Market Updates

U.S. crypto market structure bill.

The White House wants both sides to reach compromise language by the end of Feb 2026, with stablecoin yield being the main issue blocking the bill.

The House already passed the CLARITY Act on July 17, 2025. Since then, the bill has been stuck because the Senate cannot agree on one question:

Should stablecoin holders be allowed to earn yield?

THE CORE FIGHT IS STABLECOIN YIELD

Banks see yield bearing stablecoins as a direct threat to deposits. Bank trade groups warned that up to $6.6 trillion in community bank deposits could be at risk if the yield loophole stays open.

Their logic is simple: Bank accounts pay very low interest. Crypto platforms can offer 3% or more. So money could move out of banks.

Crypto firms see a yield ban very differently. They say banning yield protects banks and hurts competition. For companies like Coinbase, stablecoins are a major business line.

They made $355M in stablecoin revenue in Q3 2025 alone, and the yearly run rate is heading above $1B. That’s why Brian Armstrong pulled support when the Senate draft tried to tighten yield rules.

The GENIUS Act already banned stablecoin issuers from paying interest. But the real fight now is this: Can exchanges and platforms still share reserve income through rewards and incentives?

Banking groups flagged this loophole back in Aug 2025, and it has now become the single biggest blocker for the full market structure bill.

Here’s where things stand legislatively:

The House passed CLARITY in July 2025.

Senate Banking released its amendment in Jan 2026, but the process stalled after yield language changed and Coinbase pushed back.

Senate Agriculture moved its version forward on Jan 29, 2026 but only along party lines.

So the Senate still does not have one unified bill. Why is the White House stepping in?

Because the Senate is divided and the bill is stuck. So the White House is trying to force a compromise by focusing only on the yield issue, locking final wording, and moving the process forward before election politics take over the calendar.

Without a yield deal, nothing moves. No committee markup. No Senate progress.

Even if it passes committee, it still needs enough votes on the Senate floor and 60 votes if debate gets blocked..The House bill is broader than the Senate versions.

So even if the Senate passes something, both chambers still need to merge texts, most likely through a conference negotiation.

Signing the bill is the easy step. Agreeing on one final version is the hard part.

This is why Feb 10 is not a routine meeting.

The White House is trying to force a deal on the single issue blocking U.S. crypto regulation.

If compromise language is ready by end February, the bill can move forward. If not, delays continue and the market remains stuck in policy uncertainty.

Truflation is showing US inflation near 0.68% while layoffs, credit defaults, and bankruptcies are all rising, yet the Fed still says the economy is strong.

If you look at the economy right now and compare it with what the Fed is saying publicly, there is a very clear disconnect building.

The Fed keeps repeating that the job market is still strong. But real data coming out from layoffs, hiring slowdowns, and wage trends is telling a different story.

We are already seeing cracks forming beneath the surface. The labor market is not collapsing overnight, but it is clearly weakening faster than what official statements suggest.

The same disconnect shows up in inflation data.

The Fed continues to say inflation is still sticky and not fully under control. But real time inflation trackers like Truflation are now showing inflation running close to 0.68%.

That level is not signaling overheating.

It is signaling that price pressures are cooling rapidly and the economy is moving closer toward disinflation and potentially deflation if the trend continues.

And deflation is a much bigger risk than inflation. Inflation slows spending but deflation stops spending. When consumers expect prices to fall, they delay purchases, businesses cut production, margins shrink, and layoffs accelerate.

That is when economic slowdowns turn into deeper recessions.

Another area flashing warning signs is credit stress. Credit card delinquencies are rising. Auto loan defaults are rising. Corporate credit stress is rising.

These are late cycle signals that usually appear when households and businesses are already struggling with higher rates.

Bankruptcies are also moving higher across sectors.

This shows that the cost of capital is starting to break weaker balance sheets. Small businesses and over-leveraged companies are feeling the pressure first but that pressure spreads if policy stays tight for too long.

So the bigger question becomes policy timing.

If inflation is already cooling…
If the labor market is already weakening…
If credit stress is already rising…

Then holding rates restrictive for too long can amplify the slowdown instead of stabilizing it.

Monetary policy works with a lag. Which means by the time the Fed reacts to confirmed weakness in lagging data, the damage is often already done.

That is the risk the market is starting to price in now. This is no longer just about inflation control.

It is about whether policy is now overtight relative to real-time economic conditions.

And if that is the case, then the next phase of the cycle will not be driven by inflation fears… It will be driven by growth fears and policy reversal expectations.

That is why the Is the Fed too late? question is starting to matter more for markets going into the next few months.

Bitcoin has now crashed -53% in just 120 days without any major negative news or event and this is not normal.

Macro pressure plays a role, but it’s not the main reason Bitcoin keeps dumping. The real driver is something much bigger that most people aren’t talking about yet.

Bitcoin’s original valuation model was built on the idea that supply is fixed at 21 million coins and that price moves based on real buying and selling of those coins. In the early cycles, this was mostly true. But today, that structure has changed.

A large share of Bitcoin trading activity now happens through synthetic markets rather than spot markets.

This includes:

• Futures contracts
• Perpetual swaps
• Options markets
• ETFs
• Prime broker lending
• Wrapped BTC
• Structured products

All of these allow exposure to Bitcoin’s price without requiring actual Bitcoin to move on chain. This changes how price is discovered because now selling pressure can come from derivative positioning rather than real holders selling coins.

For example:

If institutions open large short positions in futures markets, price can fall even if no spot Bitcoin is sold.

If leveraged long traders get liquidated, forced selling happens through derivatives, accelerating downside moves. This creates cascade effects where liquidations drive price, not spot supply.

That is why recent sell offs look very structured. You see long liquidation waves, funding flips negative, open interest collapses, all signs that derivatives positioning is driving the move.

So while Bitcoin’s hard cap has not changed, the effective tradable supply influencing price has expanded through synthetic exposure.

Price today reacts to leverage, hedging flows, and positioning, not just spot demand.

Adding to this, there are other factors too driving the current dump.

GLOBAL ASSET SELL-OFF

Right now, selling is not isolated to crypto. Stocks are declining. Gold and silver have seen volatility. Risk assets across markets are correcting.

When global markets move into risk-off mode, capital exits high-risk assets first and crypto sits at the far end of the risk curve. So Bitcoin reacts more aggressively to global sell offs.

MACRO UNCERTAINTY & GEOPOLITICAL RISK

Tensions around global conflicts, especially U.S.–Iran developments, are creating uncertainty.

Whenever geopolitical risk rises, supply chain risks increase, and markets shift toward defensive positioning. That environment is not supportive for risk assets.

FED LIQUIDITY EXPECTATIONS

Markets had been pricing a more dovish liquidity backdrop. But expectations around future policy leadership and liquidity stance have shifted.

If investors believe future Fed policy will be tighter on liquidity even if rates eventually fall, risk assets reprice lower.

ECONOMIC DATA WEAKNESS

Recent economic indicators job market trends, housing demand, credit stress are pointing toward slowing growth conditions. When recession fears rise, markets derisk.

Crypto, being the most volatile asset class, sees outsized downside during those transitions.

STRUCTURED SELLING VS CAPITULATION

Another important observation:

This sell off does not look like panic capitulation. It looks structured.

Consecutive red candles, controlled downside moves, and derivative driven liquidations suggest large entities reducing exposure, not retail panic selling.

When institutional positioning unwinds, it suppresses bounce attempts because dip buyers wait for stability before re-entering.

PUTTING IT ALL TOGETHER

It is a combination of:

• Derivatives driven price discovery
• Synthetic supply exposure
• Global risk-off flows
• Liquidity expectation shifts
• Geopolitical uncertainty
• Weak macro data
• Institutional positioning unwind

Until these pressures stabilize, relief rallies can happen, but sustained upside becomes harder.