Crypto Can Survive CLARITY Failure, But Not the Wait: Bitwise CIO

Bitwise Chief Investment Officer Matt Hougan says the CLARITY Act’s fate matters less than ending the uncertainty around it. He argues that crypto can survive the bill failing, but cannot thrive in regulatory limbo.

Hougan made the case in his CIO memo, written as major crypto assets trade sharply lower and the bill awaits a full Senate vote.

Why CLARITY Act Uncertainty Keeps Institutions Sidelined

The legislation would draw a clear line between SEC and CFTC jurisdiction and replace enforcement-led oversight with a statutory framework. The House passed it 294-134 in July 2025, with 78 Democrats in favor.

Senate Banking Chairman Tim Scott then steered the bill through a 15-9 committee vote on May 14, capping nearly a year of bipartisan talks. Committee Republicans frame it as delivering clear rules and stronger investor protections.

However, the floor math is harder. Republicans hold 53 Senate seats, and passage requires 60 votes, yet only two committee Democrats backed the bill. Remaining Senate floor hurdles range from DeFi treatment to stablecoin rules.

That tension explains the odds gap. Polymarket traders price year-end approval at 51%, Hougan noted in the memo. Meanwhile, his own Washington contacts place the chances between 5% and 30%.

This uncertainty keeps institutional capital on the sidelines. Investors can buy AI stocks at record highs instead of risking a regulatory setback within months, he wrote.

“Crypto can survive CLARITY failing or rally if the bill passes. But it can’t thrive in the in-between,” Hougan said in the memo.

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Crypto Builds While Washington Stalls

Hougan describes a market shifting from momentum trade to contrarian bet. Instead of chasing hype, investors increasingly reward protocols like Hyperliquid that generate real revenue.

Bitcoin (BTC) has fallen 21% this year, while Ethereum (ETH) and Solana (SOL) are down 33% and 37%, per the memo. Crypto ETFs also face outflows, and spot trading volumes sit at multi-year lows.

In contrast, Hyperliquid (HYPE) gained 72% in a month, and Zcash (ZEC) rose 50%. Neither rally tracked the macro names, a divergence Hougan attributes to idiosyncratic fundamentals.

Hougan reads that rotation as evidence that the crypto winter may end sooner than many expect. Green returns built on real growth, he argued, signal a changing season.

He has also said the CLARITY Act could reshape crypto asset valuations once it passes.

Still, he expects no sustainable large-cap rally before Congress settles the question.

The Senate’s next scheduling decisions may therefore matter more to prices than the final vote itself.

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