Bitcoin, Ethereum is approaching to surge due to the CLARITY Act, but will the Federal Reserve raise

Improving crypto market fundamentals and positive news drive Bitcoin and Ethereum up weekly

Improving crypto market fundamentals and positive media headlines have driven Bitcoin and Ethereum to continue to rise this week. In terms of market structure, the cumulative trading volume of Bitcoin exceeded US$1.9 billion, while the spot Bitcoin ETF received capital inflows for seven consecutive weeks, totaling US$981 million.

At the regulatory level, the U.S. Senate's full vote to review the Clarification Act has accelerated. Strong push from pro-cryptocurrency lawmakers and Wall Street has made the upcoming deadline the focus of major media coverage this week.

Polymarket predicts a 38% probability that the Clarification Act will be signed into law in 2026, while Kalshi predicts a 62% probability that the bill will become law before October 1, 2027.

The probability of the Clarity Act becoming law in 2026. Source: Polymarket

As Bitcoin prices remain above $65,000, Ethereum is also attacking the $2,000 mark, and analysts are increasingly confident in a trend reversal. This sentiment is reflected in the Crypto Fear and Greed Index, which rebounded to 37 (Fear) from a June low of 18 (Extreme Fear).

Does this budding trend shift simply reflect an increased probability of passage of the Clarification Act, or does the data support traders 'confirmed beliefs about the market bottom?

CMC Fear and Greed Index. Source: CoinMarketCap

Key Overview

Soaring oil prices reignite concerns about inflation and interest rate hikes

Crypto advocates push the Clarification Act closer to Senate vote

Market focus

Soaring oil prices reignite concerns about inflation and interest rate hikes

The renewed escalation of the conflict between the United States, Israel and Iran once pushed Brent crude oil prices above $100 a barrel. At the same time, artificial intelligence capital expenditures disclosed in the July 23 earnings report shocked the market, causing the Nasdaq, Dow Jones and S & P 500 to close down.

The flow of cryptocurrency funds also changed accordingly, and the cumulative transaction volume difference (daily candle chart) between Bitcoin and Ethereum was biased towards sellers. Total outflows from Bitcoin and Ethereum were $728 million and $847 million respectively. Continuous capital inflows from spot Bitcoin ETFs also came to an end, with these funds having a combined net outflow of US$225 million on July 23.

The difference in cumulative trading volume of Bitcoin in the spot and futures markets. Source: Hyblock

Reflecting energy price shocks and their impact on U.S. inflation expectations, the market currently shows a 38% chance of the Federal Reserve raising interest rates in July. Looking further, the market has begun to pay attention to the possibility of two interest rate hikes in 2026 due to rising inflation.

Bitcoin price, capital rate, open interest. Source: Hyblock

The Federal Reserve will hold a meeting from July 28 to 29, and cryptocurrency traders usually adjust their positions before a Federal Open Market Committee meeting. The Bitcoin futures market showed signs of taking risks away, with open interest contracts falling 4.43% to $21.15 billion from a high of $22.13 billion on July 20.

Bitcoin prices followed the decline in open interest contracts, with some traders closing profitable long positions near the $67,000 resistance level, while others cutting their exposure as oil prices exceeded $100 and the probability of a rate hike soared from 12% to 38%.

In the final analysis, rising oil prices are prompting markets to re-price and shift to the view of "keeping interest rates high for a longer period of time", with growing discussions about raising interest rates in July and a second rate increase in September or October. A Fed statement on inflation, or a hawkish tone delivered at a press conference, will set the tone for the market's direction this week. The reaction of the U.S. dollar index, as well as the total open interest and funding rates in the Bitcoin futures market, will reveal how traders respond.

Crypto advocates push Clarity Act closer to Senate vote

Crypto companies, Wall Street and pro-cryptocurrency lawmakers have made a strong push to encourage U.S. senators to seek consensus on the Clarity Act and push for a full Senate vote before the August recess. The White House has reportedly agreed to a preliminary ethics plan that could address senators 'concerns about President Trump's involvement in the crypto industry.

Despite the efforts of many institutions such as Coinbase, the Cryptographic Innovation Committee, the Blockchain Association, Schwab Financial, and BlackRock, Senate Democrats have yet to provide the necessary support to ensure that the procedural threshold of 60 votes is met. Even with the text of the bill updated, Democratic senators remain concerned about related issues such as consumer protection, ethics and illegal financing.

The chances of the Clarity Act becoming law in 2026 remain low, but last week's strong advocacy on Capitol Hill has had a positive impact on the crypto market. Velo's data shows that decentralized finance-related tokens-one of the crypto subareas that could benefit if the Clarification Act became law-have risen in the past seven days.

Image source: CoinMarketCap Academy (optimized)

DeFi tokens have risen as the impetus of the Clarification Act increases. Source: Velo

Analysts at Hyblock also noted that Ondo's price strengthened, while its open interest volume increased 41% in three days.

DeFi, RWA tokens rose due to the Clarification Act news. Source: X / Hyblock

Analysts said that although these RWA and DeFi-related tokens "have not received enough attention relative to their growth in open interest,""a little bit of good news from the Clarification Act may help."

With less than nine days before lawmakers begin their August recess, crypto advocates have emphasized the importance of submitting the bill to President Trump for signature before the midterm elections.

Market Focus

The CME FedWatch tool still tends to believe that this week's Federal Open Market Committee meeting will keep interest rates unchanged, but the market is reflecting a scenario of "keeping interest rates high for longer" combined with energy shocks. The Fed's decision and its press conference Wednesday could help determine the direction of markets. The U.S. dollar index, crude oil and Bitcoin open interest contracts are indicators to pay attention to.

Concerns about AI capital expenditures continue to set the tone for the Nasdaq, Dow Jones and S & P 500, explaining how investors weigh year-to-date enthusiasm for AI and large technology stock returns against construction costs. If artificial intelligence trading starts to lose steam, have cryptocurrency investors factored in potential downside risks to the stock market?

President Trump has introduced a series of new U.S. tariffs on multiple countries, while the war in the Middle East escalates, and the risk of regional spillover remains high. These developments could push up inflation and slow economic growth. Will they weaken the current recovery momentum in the cryptocurrency market?