- Bitwise CIO Matt Hougan says crypto will rally sharply in the near term if the Clarity Act succeeds.
- However, he places the odds of approval at only 50% due to recent setbacks.
Matt Hougan, Chief Investment Officer of Bitwise, recently noted that the Clarity Act will largely dictate the trajectory of the crypto market in 2026. He explained that its successful passage will bake the United States of America’s pro-crypto regulatory environment into law, making it hard for the succeeding administrations or regulators to hinder or reverse its progress in the future.
Crypto Rallies Sharply If Clarity Law Succeeds
Hougan predicted that if the Clarity law passes, particularly the version of the bill the “crypto industry is comfortable with,” the market will rally sharply. He claimed that investors will likely interpret the legislation as a guarantee toward the growth of stablecoins and tokenization.
The market will eventually price in investors’ confidence, leading to a major boost in crypto asset valuations. Additionally, he highlighted that significant price returns could occur in the near term upon approval of the law.
Failure of the Clarity Law
On the other hand, Hougan warned that the failure of the Clarity Act would be detrimental to the crypto industry. He emphasized that it would “reverse today’s pro-crypto push.” Moreover, he cautioned investors that much is at stake if a Senator Elizabeth Warren-like figure were to take over the US Securities and Exchange Commission (SEC) as chair.
Despite the resulting bearish sentiment and challenges to crypto, the bill’s failure wouldn’t mean the end of the entire industry. Hougan believes the sector will eventually enter a “show me” period, in which crypto will have to prove that it’s indispensable to the everyday lives of regular Americans and traditional finance (TradFi).
Its track would mirror Uber and Airbnb’s journeys, in which they initially operated in the gray area of regulations until they became essential to the public, forcing legislators to amend the rules to accommodate them.
50-50 Chance of Approval
Given the recent setbacks, mainly due to Coinbase CEO Brian Armstrong’s opposition to the current form of the legislation, Hougan has revised his forecast regarding the bill’s success. He recalled that Polymarket had the odds of the Clarity Act’s approval at 80% in early January, but noted that his assessment is only 50% at this rate.
Migration of Bank Deposits Into Stablecoins
Traditional banks are clearly lobbying against the Clarity Act because of its disruptive effects in their sector, especially on bank deposits. Brian Moynihan, CEO of the Bank of America (BoA), projected that allowing yield-bearing stablecoins in the US market could result in a flight of over $6 trillion in bank deposits to stablecoins.
Geoffrey Kendrick, Global Head of Digital Assets Research at Standard Chartered, had more conservative numbers in his recent report. He estimated that $500 billion in deposits from traditional banks could migrate to stablecoins by the end of 2028 if the Clarity Act succeeds. It’s much lower than the BoA’s assessment, but still presents alarming numbers.
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