Catalysts Behind Crypto's Rebound & Clarity Act's Unclear Status

Welcome back to Crypto Corner here on Schwab Network. I'm Jenny Horne and joining me today is Nate Peterson, director at the Schwab Center for Financial Research. So Nate, I appreciate you being with us. Now, Bitcoin momentum has continued with the currency briefly breaking above 80,000. So Nate, what is driving this latest move and do you think the cryptocurrency revival still has some further room to run? >> Yeah, yeah, good morning, Jenny. Yeah, what what a week, right? To finally get kind of breathe some life into uh the the the crypto prices, you know, across the board really. Um obviously, it's related to uh there's been a yield creep going on within treasuries, but it's not just in the US, it's globally. Uh a lot more focus on deficits, etc. Uh Scott Bessent stepped in and said, "Hey, um I don't think this this kind of yield creep, you know, cuz we got 18-year highs on the 30-year in the US Treasury yield." And he said it doesn't reflect the fundamentals. Uh we're going to do some buying. This is kind of like a blink, if you want to give it that, that um perhaps there's some concern around the elevated yields and the trajectory of yields. And so lo and behold, gold and Bitcoin gets some room there. So Jenny, it's not, you know, new to talk about you know, government deficits being an issue and unsustainable. Bitcoin came out of the great financial crisis because of this, but it feels like uh that uh perhaps there's a little bit more weight or substance to this theme of dollar debasement, ability to pay back debt uh with higher yields. We've got uh you know, a combination of factors that are contributing to higher yields. But Bessent's move, I think, was really kind of the trigger for uh gold and Bitcoin to see some allocation there. If you're whether you're a government bank or an investor, do you want to go to dollars? Do you want to go to treasuries? Do you want to go to another currency? Or would you like to get over into Bitcoin and gold which are kind of out of in a sense that whole fiat monetary system. So, really impressive week there. Gold also saw you know, a nice bounce there, but I think it was 23% last week on Bitcoin. A little bit of a pause so far this week, but maybe just taking a breather. >> Okay, and so the Clarity Act is obviously back in focus as the industry pushes for a clear regulatory framework. And so really how significant could that be as far as I mean just the overall space and just further regulation that I think the the crypto asset class as a whole has generally really been hopefully benefiting from and just that more regulatory certainty that seems like the market also appreciates. >> Yeah, yeah, no doubt. It's a lot of discussion. We know was uh passed by the house last year. It's been held up in the Senate. There's been a lot of back and forth between uh you know, the the traditional uh banks and uh potentially some of the legislation that would cover um a lot of the stable coin yield etc. Uh we know that uh right now uh they're in recess and they're not coming back until September 14th, but there is a vote uh that is going to be slated a cloture vote uh which is just going to put an end to the uh debates and to filibusters. It's not a formal vote. But Ginny, they get back September 14th, September 15th, the vote is scheduled. Trump has been uh vocal uh about getting this pushed through because of the well, you want to be uh up front in terms of you know, the the cryptocurrency capital of the world nation uh that is going to be on board in terms of this uh technology in web 3.0. And it's also has to do with not falling behind but that but there's there's a window here and Cynthia Lummis here her term is up in January. She's a big crypto advocate. But she's basically saying look, we've got to get this passed by you know, before the midterms this year. Otherwise there's going to be the midterms, there's going to be potentially some more delays and so the timing of getting the clarity act passed is going to get pushed further out further out which will lead to a lag in you know, the US's ability to push forward with this innovation. So Kaushey right now now what you need is 60 votes from the Senate on this cloture vote on September 15th. Kaushey has like a 22% chance of getting 60 votes. Brian Armstrong, CEO of Coinbase is much more optimistic about that. So it it feels like Jenny there's an October recess that starts on October 5th. There's the midterms as we go into November and so it feels like there's a really tight window. You get back from recess September 14th, big vote on September 15th and of course that would be very constructive for the crypto, you know, industry as a whole if you can at least get this passage on the cloture vote so then you can move and progress or pave the way for a formal vote beyond that. >> Okay, and Bitcoin does remain above its 50-day and 200-day moving averages. So from a technical perspective, what are the key levels you're watching to determine whether of course this rally can continue into year end? >> Yeah, Jenny. So we talked about on the downside we were just kind of like near the trough around that 60 58 to 60k ish level around there on Bitcoin. Obviously last week different story. Boom, we get a big push to the upside. We've pushed above the 200-day simple moving average. And we got an RSI, relative strength indicator, up at 80. It's been a while since we've seen that. And technically, Jenny, what is pretty common is that you get this big push higher like we've had and you push through potential resistance at the 200 simple day moving average. And then you get in technical terms what is called a throwback, which just means you would come back down and kind of retest that resistance level and see if it holds up as support. Prior resistance is support is kind of the technical term when we talk about this kind of a price action. So, if that were to occur, that would mean Bitcoin would come down and roughly test the 75,700 ish area. And if you're bullish, what you'd like to see, test that support, get a nice bounce off of that support, and then 80,000 is a little bit of a resistance level. So, first support hold, you don't have to test it, but it's just very common in technical land. And then [snorts] hopefully get a bounce if you're bullish and then push up and break through 80. That would be kind of your bullish kind of setup or technical event that could trigger some more buying. So, if you aren't in the space and you're looking at this technically, you can say let's see if it bounces. Let's see what it does at 80,000. Some technicians might wait for that 80,000 to be eclipsed on the upside before they really consider it confirmation of this bullish move that we've seen recently. >> Okay, and a lot to look forward to here as we do approach the back half of this year. But, I really appreciate it, Nate Peterson, director at the Schwab Center for Financial Research. That's going to wrap up this edition of Crypto Corner. Subscribe to the Schwab Network YouTube channel for weekly episodes. I'm Jenny Horne. I'll see you again next time.