Bitcoin experienced a sharp reversal after the US Senate failed to advance the Digital Asset Market Clarity Act, sending the cryptocurrency to its largest single-day decline since June as investors reassessed the outlook for US crypto regulation
The procedural vote failed 49 to 50 on September 15, falling well short of the 60 votes required to advance the legislation. BTC dropped by more than 5%, falling below $76,000 after trading near $82,000 earlier this month in reaction to the news.
BTC liquidations on the day also reached the 93rd percentile of the previous 90 days, with long positions accounting for 85% of the $147.2 million in completed day liquidations, according to Alice Liu, Head of Research at CoinMarketCap. Funding was also at the 46th percentile of its 90-day range, putting the liquidation wave well above recent levels without a funding spike.
At the same time, Spot demand weakened, with US spot Bitcoin ETFs recording roughly $450.4 million in net outflows on Tuesday, their largest daily withdrawal since June 24, according to SoSoValue data. The outflows also came as markets faced pressure ahead of the Federal Reserve’s September meeting.
Leveraged Positioning Amplified BTC’s Selloff
The failed vote hit a market positioned around expectations of regulatory progress. As BTC moved lower, leveraged longs began hitting liquidation levels, with exchanges closing positions as margin requirements were breached and adding sell orders into the decline.
Meanwhile, concentrated forced selling on the long side meant positions built around higher prices were being removed as the market moved through lower levels, adding to the downward pressure already coming from traders reducing exposure after the vote.
On the other side, ETF investors were pulling capital from the spot market as BTC declined, putting another source of supply into the market alongside the derivatives liquidation flow, while pressure ahead of the Federal Reserve’s September meeting was also weighing on risk assets.
The result was a market absorbing forced selling from leveraged longs at the same time that ETF outflows, macro headwinds were reducing buying pressure, leaving less sources of liquidity to absorb the move.
Will Fresh Clarity Act Support Bring Back Bitcoin Liquidity?
Crypto Journalist Eleanor Terrett has since reported that seven Senate Democrats remain committed to passing the Clarity Act despite this week’s failed vote. The senators said the setback was “not the end” and said they remain committed to finding a bipartisan path forward. Earlier statements from SEC chair Paul Atkins and CFTC chair Michael Selig also reassured the public of their determination to ensure the bill’s passage.
Still, BTC was trading around $76,473 at writing time after falling to $75,211 today, keeping it close to the levels reached after Tuesday’s selloff and suggesting traders are not yet treating the latest statement as a sign that the regulation is back on track.
The legislative calendar adds another constraint, with the Senate scheduled to enter a state work period from October 5 through November 6, leaving lawmakers with a narrower window to make progress before the midterm elections.
Meanwhile, the proposal’s ethics provisions covering elected officials and crypto interests continue to cause disagreement as banking groups push for tighter limits on stablecoin rewards, warning that they could pull deposits away from community banks.
The recent sell-off has already removed a large amount of leveraged exposure, while weaker spot demand limits the buying available to absorb further selling. Until negotiations produce a clearer path forward, BTC’s positioning and liquidity could remain sensitive to the next regulatory development.
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