A BitGo Research report said that Bitcoin (BTC) absorbed two bearish catalysts, a rate hike by the Federal Reserve and the Senate’s failure to pass the CLARITY Act, to recover and maintain its position above $86,000.
According to the report, BTC’s price action was the outlier compared with other assets like gold and equities. The flagship cryptocurrency fell toward $75,000 following the rate hike before making a quick recovery as ETF demand and short covering supported the rally.
Bitcoin Absorbs Bearish Catalysts
According to BitGo Research Chief Greg Cipolaro, BTC’s reaction contrasted with that of traditional assets like gold after the Federal Open Market Committee (FOMC) raised interest rates. Cipolaro argued that the flagship cryptocurrency’s muted reaction to the hike and the CLARITY Act setback likely means the price action had already factored in the bearish developments. Renewed ETF demand, lower oil prices, declining Treasury yields, and short covering also supported BTC’s rally.
“Bitcoin absorbed a hawkish FOMC surprise and a failed Clarity Act vote in the same week, and shrugged off both. Gold, equities, and the dollar moved exactly as textbooks predict. Bitcoin didn’t.”
Two Bearish Catalysts for Bitcoin
The first bearish catalyst was the Senate’s failure to pass the CLARITY Act, a development that came before the Federal Open Market Committee (FOMC) decision. The US Senate rejected cloture to proceed with H.R. 3663. The vote ended 49-59, 11 votes short of the number required. The CLARITY Act aims to establish a clear federal framework, dividing oversight of digital assets between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Senator Thom Tillis, who was actively involved in bipartisan discussions regarding crypto market rules, ultimately voted against cloture so that he could file a motion to reconsider. However, no new cloture vote is on the Senate’s official list.
The next bearish catalyst for BTC was the Federal Reserve’s decision to raise interest rates by 25 basis points. It was the first rate hike since July 2023 and was supported by all 12 voting members of the committee. BitGo said that, while the hike was expected, the Fed’s new rate projections caught markets by surprise. According to the September Summary of Economic Projections, the median federal funds rate was 4.1% for 2026 and 2027, against June projections of 3.8% and 3.6%. Meanwhile, projections for 2028’s median jumped from 3.4% to 3.9%. Additionally, 16 of the 18 committee members project at least one more rate hike this year. According to Cipolaro, the projections suggest Fed officials expect interest rates to remain elevated.
Meanwhile, the traditional markets reacted along expected lines to the Fed’s decision. The Dow Jones ended September 1.21% lower, and the S&P 500 fell 0.44%, while short-term Treasury yields rose and the dollar strengthened.
Bitcoin (BTC) Price Action: A Case for Resilience
Bitcoin’s reaction to both developments was telling. The flagship cryptocurrency dropped sharply after the Senate failed to advance the CLARITY Act, falling over 3% to $75,584. The Fed’s decision to increase interest rates drove the price lower. However, BTC rebounded from a low of $74,911 to reclaim $76,000 and close at $76,144. The recovery was attributed to the fact that the rate hike was already priced in. The flagship cryptocurrency continued its ascendancy despite the bearish developments, as ETF inflows, improved market sentiment, and short covering pushed the price higher.
BTC rose nearly 6% on Friday thanks to positive regulatory shifts and renewed institutional demand, crossing $80,000 and settling at $80,875. The flagship cryptocurrency started the current week with a 6.70% jump, crossing $86,000 and settling at $86,594. BTC is currently trading around $86,140.
The rebound occurred as spot Bitcoin ETFs recorded substantial inflows. CoinGlass data shows the ETFs recorded $159.50 million in inflows on Thursday, and $433 million on Friday. Inflows jumped to $999 million on Monday, while Tuesday recorded $714.70 million, taking total inflows to $2.3 billion over four sessions. Nansen research analyst Nicolai Sondergaard also highlighted strong inflows as a key driver behind BTC’s rally, with forced short liquidations as another factor.
According to BitGo, BTC did not behave as expected following the current hike. Cipolaro said BTC historically weakened alongside other traditional assets when market conditions became difficult. Equities, gold, the dollar, and Treasury yields behaved as expected, while BTC was the outlier. However, BitGo highlighted spot Bitcoin ETFs, which gave institutions and brokerages regulated access to the asset; several public entities held BTC on their balance sheets, and derivatives markets have also grown considerably.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
