Grayscale: Bitcoin price can fall further if CLARITY Act fails

Grayscale sees two possible scenarios for the Bitcoin price, which is currently trading around $60.000 with a slight loss of 0.4% in the past 24 hours. In the best case, Bitcoin may already be near the bottom. In the worst case, the price could still fall a bit further.

Bitcoin is available at OKX and Bybit.

The base case: Bitcoin near the bottom

According to Grayscale, much depends on three factors: the progress of the CLARITY Act in the US Senate, the balance sheet position of Strategy, and the Federal Reserve’s interest rate policy. If the CLARITY Act passes the Senate, Strategy strengthens its balance sheet, and the Fed refrains from raising rates, then the current price may already be near the low of this bear market.

Grayscale also points out that the peak-to-trough decline in this cycle is likely to be less severe than in previous cycles. Historically, Bitcoin dropped about 80% from its high, but the company does not expect that hit this time. The reasoning is that the bull market was more moderate and institutional demand for digital assets has become more stable and persistent.

The downside scenario: more pain if the Fed intervenes

If the CLARITY Act does not pass the Senate this year, so-called Digital Asset Treasury companies (DATs) further reduce their leveraged positions, and the Fed is forced to raise rates due to persistent inflation, then the Bitcoin price could fall a lot further. Grayscale describes this as a moderate further decline, without naming an exact bottom.

This downside scenario aligns with previous concerns regarding the pressure on Strategy and the broader market. The combination of regulatory uncertainty and a potentially tighter monetary policy thus poses the biggest threat to a recovery of the Bitcoin price in the short term.