The Market Is Primed For CLARITY

This is the moment we’ve been waiting for…

After sitting in the Senate for more than a year, the CLARITY Act is getting ready for a vote.

It’s the last push between Democrats and Republicans to hash out the final language before getting voted on.

And it’ll come down to whether President Trump can hash out a deal with Democrats around ethics.

Regular readers might recall the essay from April called Trump’s Crypto Sideshow, where we mentioned the bill would come down to what is referred to as the ethics language.

It’s the part of the bill that helps keep elected and government officials from profiting off the industry, something those in and not in the industry should easily agree with.

What we also mentioned in that essay is that Trump tends to push the boundaries of  ethics with his involvement in his family’s crypto dealings, just as final CLARITY negotiations begin. This time is no different.

Trump Media pitched the idea to charge customers a $100,000 monthly fee to gain access to market-moving posts by the President.

It’s a pay-to-play service.

The news likely made the blood boil for many politicians in Washington, D.C., working on the bill.

For those in the digital asset industry, it was more of a “why now?” We are so close… Just wait until the CLARITY Act passes.

But this might just be part of his negotiation tactics for all we know. Only time will tell how the strategy works out.

For now, the first step was taken by the President earlier this week. He has agreed to ethics language with the Senate Republicans spearheading the bill. It’s a good first step. But not the final step.

What is needed next is for Democrats to come to the table to hash out the final language. Thus far, they’ve been unwilling to cooperate.

As we write, Democrats like Gillibrand and Gallego have yet to read the text. By the time you read this, we may get a few first impressions surfacing in the news.

The stakes are high. And as it sits right now, things could go either way. Even the most seasoned experts in Washington, D.C., are unsure how this will pan out.

We can see just how fluid the situation is by looking at Polymarket’s market on whether the CLARITY Act will be signed into law this year. It was down to 31% on Monday, rose to about 53% in less than 24 hours, and is back down to 41% as of this morning.

Source: Polymarket

While some social media pundits might be telling you the outcome is certain one way or the other, don’t buy it.

The CLARITY Act’s passage could go either way as we approach the eleventh hour here.

And what I find so interesting here is the market is ready for a major move to the upside if CLARITY’s outcome looks certain and favorable.

Let me explain…

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Slowly, Then All at Once

We’ve been straightforward in our view of the market.

It’s going through a bottoming-out process. This often takes time to play out. The process tends to play out with various indicators that start to emerge over a span of weeks and months that tell us current prices are at a severe discount.

This morning over at the Brownstone First Signal e-letter, I went ahead and showed a chart on ETH/BTC. It’s a ratio that measures how much Bitcoin one Ether can buy.

The ratio is coiling up to break through its 200-day moving average. And when a sustained breakout occurs, we historically see major gains in the market.

In 2017 to 2018, the price of ETH went from less than $60 to more than $1,300 … Less than $300 in early 2020 to more than $4,600 by late 2021…

Last summer’s sprint went from the $2,100 range up to nearly $5,000 in just two short months… and we’re seeing the pattern repeat now.

What I’m saying here is the market is at an inflection point on whether it’s about to turn into a frenzy in the coming months or continue its doldrums.

It’s not necessarily a straight buy now or a sign the market is going to rip higher tomorrow. It’s more of an indication that now is when you need to be glued into the everyday activity.

And while that’s exciting, what is getting us to really pay attention here at Brownstone Research are the signals showing us the structure of the market is giving a green light for upside momentum to happen.

Here are a few reasons…

In The Bitcoin Buy Signals Keep Adding Up, we published an essay on a model known as Bitcoin Power Law as Bitcoin was hovering near $60,000 per coin last month.

It’s a model that’s based upon complex systems in nature. And when we discussed the model, Bitcoin was right near its $59,109 support price. Price has since begun to climb.

Then there was Bitcoin’s Hidden Divergence, a case study on what’s called skew.

Skew essentially tells us how much fear there is in the market. The higher the skew, the greater the fear and the higher the premium traders are willing to pay for downside protection.

What we mentioned just a few days after Bitcoin closed around $59,500 was that sellers were exhausted. They were running out of firepower.

And more recently, we got an even bigger signal on skew. That’s because for more than a year, skew has leaned bearish – puts were more expensive than call options.

When skew flips to where calls are more expensive, after a long period as we see today, price begins a new trend.

The last time we saw this was in January 2023. Price was below $20,000 per coin. Less than two weeks later, price started its march to break $100,000 per coin.

The flip in skew was a change in the structure of the market. It enabled price to gain momentum the way it did.

And today, we’re seeing skew getting ready to flip for the first time in about a year. It’s a major signal that the market structure is giving room for what can be a major price catalyst for the market. It tells us the market has slowly shifted over the last couple of weeks.

It means if a catalyst surfaces now, price can move faster than we might be ready for.

The Uncertain Outcome

The current structure of the market is what makes the negotiations around the CLARITY Act that much more interesting.

The current outcome of the bill is still up in the air. It’s a fluid situation that is changing by the minute.

I’ve personally been receiving updates on an almost hourly cadence for what is happening in Washington, D.C. And I’m here to say the outcome is anything but certain despite what you might read elsewhere.

Which means the market has not priced it in yet. Especially to the upside.

Whatever happens in the next few days will tell us how soon the next bull market will arrive.

Will it be arriving next…

Or will we get more time to build out our portfolio before it begins later this year?

Only time will tell. Stay tuned…

Your Pulse on Crypto,

Ben Lilly
Editor, Chain of Thought