Bullish commentary increased after last week’s progress on the CLARITY Act, but that’s not always a good thing.
Although there is still much work to be done to become law, the highly anticipated CLARITY Act was finally passed by the Senate Banking Committee a few days ago, which is an important step in the right direction.
The effects on the crypto market were immediate but did not last long, and Santiment analysts warned that the rapid shift in narrative may still be unsustainable.
Potential impact of the CLARITY Act
Santiment’s post on the CLARITY Act noted that BTC experienced a “major spike in social media euphoria” after the Senate advanced the bill in a bipartisan 15-9 vote. Analysts agreed with other experts that BTC and the entire crypto industry are now on the verge of regulatory clarity in the United States.
The CLARITY Act is arguably the most comprehensive crypto law in the United States, which could answer some very important questions about which assets are considered securities and which are not. As such, any progress in enacting the bill should be “considered optimistic for crypto (in the long term) as it could finally give the industry clearer rules in the United States.”
Santiment believes that one of the biggest problems in crypto, especially in the United States, is uncertainty. Companies, traditional investors and big banks are “hesitant to fully engage because they don’t know which crypto assets might later qualify as securities, what rules they must follow, or whether regulators might suddenly crack down on them.”
However, all of that could change in an instant if the CLARITY Act passes. Santiment predicted that “more institutional money and powerful players are expected to enter (or re-enter) the markets” if it becomes law.
Bullish Comments Aren’t Always Great
Although Santiment’s post adds that prices will increase if the bill is officially signed into law, he cautions that this is far from a reality now and could actually limit the progress of crypto assets at the moment.
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“Don’t be surprised, however, if the market values of many caps are somewhat ‘fixed’ before the CLARITY Act is officially passed.”
Additionally, analysts explained that bullish comments jumped to 1.55 for every 1.00 bearish after the Senate Banking Committee passed it last Thursday. However, such circumstances are not ideal, and Santiment has repeatedly warned in the past that when the crowd becomes too optimistic, they “advise caution” because “markets generally move opposite to crowd expectations at any given time.”
