Bitcoin Reverses Monday’s Rally as CLARITY Act Odds Slide on Polymarket

Bitcoin Reverses Monday’s Rally as CLARITY Act Odds Drop

Bitcoin fell 1.7% since midnight UTC to $76,862, giving back much of Monday’s late rally as Polymarket’s odds of the CLARITY Act becoming law this year dropped sharply overnight.

Bitcoin climbed from $75,806.11 to $79,427 on Monday before reversing those gains on Tuesday. The largest cryptocurrency was trading at $76,862, down 1.7% since midnight UTC and 6.6% below the month’s $82,284 peak recorded on Sept. 4. Ether declined 1.6% to $2,474.76, while Solana fell 2% to $100.43.

Polymarket’s probability of the U.S. CLARITY Act being signed into law this year also reversed course. The odds reached 34% on Monday before falling to 17%. The decline followed reports that Democrats had prepared a counterproposal after rejecting a revised version circulated by Republican negotiators on Sunday. The primary disagreement centers on ethics provisions concerning officials’ crypto holdings rather than the bill’s market-structure provisions.

The Senate is scheduled to vote at 2:15 p.m. ET on whether to invoke cloture, which would advance the bill toward a vote. Approval would bring the crypto industry closer to its first comprehensive U.S. framework defining regulatory responsibilities. If the measure fails, market-structure legislation could be delayed until after the November midterm elections.

Selling was widespread across the crypto market on Tuesday. A total of 92 constituents in the CoinDesk 100 were trading lower, while the index declined 1.6%.

Traditional markets moved in the opposite direction. Nasdaq 100 futures gained 0.43%, while S&P 500 futures rose 0.35% as part of Monday’s AI-related sell-off reversed. The Dollar Index also increased 0.17%, suggesting that Tuesday’s weakness was largely specific to crypto. This reversed the previous day’s pattern, when crypto had been the only major asset class posting gains.

Derivatives Positioning

Long-short positioning remains balanced: Crypto futures traders remain divided ahead of the Senate’s CLARITY Act vote. Aggregate open interest dropped 1% over the past 24 hours to $135 billion, while trading volume jumped 54% to $207 billion. The combination indicates that existing traders are closing positions faster than new positions are being established.

Bitcoin futures show selling activity: Analysts at Marex said bitcoin’s overnight decline toward $77,000 was accompanied by taker selling in futures. Takers execute trades against available liquidity in an exchange’s order book. Overall bitcoin open interest remains below 680,000 BTC, pointing to limited demand for leveraged positions.

Major-token open interest falls: Futures open interest for ether, solana and XRP remains under pressure. Solana open interest recently dropped to 58.81 million tokens, its lowest level since May, according to CoinGlass.

Negative CVD points to selling pressure: The 24-hour open-interest-adjusted cumulative volume delta for major cryptocurrencies remains negative, indicating that sellers are influencing price action. A negative CVD suggests a larger portion of short-side activity is being executed through market orders rather than passive limit orders.

XLM stands apart: Stellar’s XLM is outperforming the broader market in both price and derivatives activity. The token is up 4% over the past 24 hours, while futures open interest has climbed more than 10% to 1 billion XLM. The combination is generally interpreted as evidence of long accumulation or bullish positioning. Annualized funding rates remain around 10%, pointing to continued demand for long exposure without clear signs of excessive leverage.

Funding remains generally positive: Funding rates are moderately positive across most major tokens, including bitcoin. Ether and SOL have slightly negative funding, indicating a modest short bias. If the CLARITY Act procedural vote succeeds, those short positions could potentially contribute to a short squeeze. TRX remains an outlier with deeply negative open interest, a trend seen over recent days.

Volatility rises modestly: Bitcoin and ether 30-day implied-volatility measures, BVIV and EVIV, have moved higher but remain close to recent levels and well below the peaks seen in February and June. The increase points to somewhat stronger hedging demand ahead of the Senate vote, which could influence the market’s near-term direction.

Call options lead trading: Deribit’s options market continues to show a normal, upward-sloping implied-volatility curve, indicating that traders are expecting relatively orderly conditions over the next 24 hours instead of a major volatility surge. Bitcoin’s top-five options by volume are dominated by higher-strike calls, while ether shows a similar pattern.

Token Performance

Filecoin’s 27% rally on Monday came alongside a 70% increase in futures open interest, but both moves are now reversing quickly. FIL fell 5.1% since midnight UTC to $0.89 and was down 13% over 24 hours, while open interest declined 23% to $106 million.

AI and computing-related tokens faced another difficult session following Anthropic CEO Dario Amodei’s weekend comments calling for slower AI development. Internet Computer was the weakest performer, falling 6% to $2.58. Theta Network declined 4.5%, while NEAR Protocol dropped 3.7%.

Uniswap was one of the exceptions in the DeFi sector, gaining 1% to $6.60 and rising 4.8% over 24 hours. The token remains among the DeFi assets with significant exposure to the outcome of Tuesday’s vote.

Venice Token, which reached a record high last Wednesday following a token burn and short covering rather than sustained buying, has since retraced about 20%. It fell another 4.5% on Tuesday to $22.05.

The two leading privacy-focused tokens continued to move in different directions for a fifth straight session. Monero rose 0.37% to $516.41, while Zcash declined 1.87% to $1,141.

Cosmos and XDC Network each gained 1.4%, joining a small group of advancing tokens. Stellar was nearly unchanged on the day but remained 4.3% higher over the previous 24 hours.

CoinMarketCap’s Altcoin Season Index stood at 36/100, keeping it in neutral territory after last week’s reading climbed as high as 51/100.

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