Crypto Fundamental Analysis: Clarity Act progress fails to lift market confidence

The second week of May comes to an end, and with it, a new environment of consistent neutrality has once again started to appear across the main cryptocurrencies in the market. Although there were developments around potential crypto regulation in the United States, this alone has not been enough to sustain confidence across the cryptocurrency market.

While regulatory progress may be positive for the long term, there is still pressure coming from rising interest rates in the bond market, which may be preventing crypto from maintaining consistent short-term appeal. If this effect remains in place, neutrality may continue to be relevant across cryptocurrencies in the coming sessions.

Clarity Act developments

This week brought new details around potential regulation that could be relevant for the cryptocurrency landscape, as the Clarity Act became a key part of discussions in the Senate. The bill advanced through the Senate Banking Committee with 15 votes in favor and 9 against. The next step would be to send the text to the Senate, where around 60 votes would be needed for approval before moving to the House of Representatives. This marks an important step forward in the US regulatory process in the short term.

Although the Clarity Act seeks to define the SEC’s authority over digital assets and establish clearer rules within the crypto environment, with the goal of reducing the regulatory uncertainty that continues to weigh on the market, the process is still far from final approval. In the long term, this regulation could allow more institutional participants to enter the digital asset market, but in the short term, it still does not seem strong enough to clearly reinforce momentum across cryptocurrencies.

To some extent, this update helped generate a more constructive confidence backdrop for major cryptocurrencies such as Bitcoin, but on its own, it has not been enough to sustain consistent short-term confidence in the market. However, any relevant progress over the coming weeks could begin to help the long-term confidence outlook stabilize more consistently.

 

Bonds are the new enemy

Even with regulatory progress, these developments alone have not been enough to fuel the cryptocurrency market. This is partly due to broader macroeconomic conditions, where a relevant recovery in global bond yields has started to stand out.

Now, 10-year bonds across major economies continue to show a consistent recovery in yields. The United States stands out, with yields near 4.6%, levels not seen since January 2025. Canada is also moving toward 3.7%, while UK bonds remain above the 5.00% area. The common factor across these bond markets is the relevant short-term increase in yields, along with an upward direction that has remained in place over recent sessions.

Source: TradingEconomics

This is relevant because bond markets are considered more stable and attractive, as they offer yield, unlike risk assets such as cryptocurrencies. Therefore, the steady increase in interest rates may be helping keep demand for this market stable in the short term, potentially reducing the liquidity available for risk assets such as cryptocurrencies.

In fact, the increase in yields coincides with a reduction in crypto demand activity. This can be seen in Open Interest, the indicator that measures the total number of buy and sell positions in the BTC market, which once again showed signs of weakness toward the end of the week, moving back toward the 26 billion area. This dynamic also coincides with the decline in BTC’s price, suggesting that a possible exit from long positions has started to become relevant in the market, potentially driven by a high-rate environment that reduces appetite for risk assets.

Source: Cryptoquant

In the short term, this event appears to be preventing the cryptocurrency market from recovering ground in a consistent way. If the bond market continues to show relevant increases in yields, this could lead to persistent weakness in crypto demand, keeping a scenario of indecision or bearish pressure in place over the coming sessions.

 

Bitcoin relative to other markets

Now, a significant decline has started to appear in the correlation coefficient between Bitcoin and the US Dollar Index, the DXY, with the reading close to -1. This coefficient indicates a strong inverse relationship between the movements of both assets over the medium term, suggesting that as the US dollar has regained strength, Bitcoin has started to show significant short-term weakness. It is important to remember that correlation coefficients can change over time.

Source: Data – TVC, StoneX, Tradingview

This relationship is relevant because the increase in bond yields may be mainly supporting the US dollar as an attractive currency in the short term. It also shows that current market demand may be shifting toward assets such as bonds and, within currencies, toward the dollar. As a result, this may be limiting the demand that could otherwise move into the cryptocurrency market.

So far, the crypto market has not been able to maintain its appeal as a relevant alternative or safe-haven market in the short term, and the macroeconomic effect of both bonds and the dollar may continue to weigh on demand strength.

In general terms, as with bonds, if the dollar continues to show consistent strength, this may also affect appetite for cryptocurrencies and even begin to establish clearer weakness across the digital asset market in the short term.

 

Confidence shows no relevant recovery

Looking at the Fear and Greed Index, it stands out that there have been no meaningful advances in recent sessions, with the indicator still moving around 46 points, within the “neutrality” zone. This suggests that, for now, confidence remains in a consistent phase of indecision in the short term.

Source: Coinmarketcap

This behavior indicates that the market still does not show consistent appetite for cryptocurrency demand. If the index fails to move higher in a clearer way, it will continue to reflect that conditions are not ideal for sustaining a relevant demand environment in the short term. This could also be pointing to a potential phase of indecision or weakness in crypto market price action over the coming sessions.

 

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25