Inflation keeps the Fed on hold and weighs on Bitcoin
Last week’s US inflation data reinforced the view that inflation remains a live problem. Producer prices came in well above expectations, with both services and energy contributing to the upside surprise. The energy component matters most. Rising oil prices, driven in large part by the continuing US-Iran conflict, are now feeding more clearly into the inflation story, and with little sign of a resolution, that pressure is unlikely to fade quickly. Retail sales also came in firm, helped in part by sharply higher gasoline sales, while last week but one employment data still pointed to a robust labour market. Taken together, the macro backdrop gives the Fed little room to turn more dovish.
That change in rate expectations has weighed on Bitcoin. So far last week, Bitcoin closed at -5.78%, underperforming both gold and equities. The move has also been reflected in flows. Bitcoin alone has seen US$830 million of outflows last week, while the global ETF market for crypto assets has recorded US$920 million of outflows overall. That marks the first meaningful turn in sentiment after seven consecutive weeks of inflows and suggests investors are becoming more cautious as inflation risks reassert themselves.
The Clarity Act clears committee — what it means for markets
The other major focus this week was the Clarity Act. After months of delay, the Senate Banking Committee approved the bill in a 15–9 bipartisan vote, marking the first substantive procedural breakthrough for comprehensive US crypto market structure legislation. While the committee outcome does not guarantee eventual passage, it materially improves confidence that the bill now has a viable path through the Senate.
The revised text expanded significantly from the January draft, growing to 309 pages from 278 pages, and attracted more than 100 proposed amendments ahead of markup. Most did not survive. The most important compromise centred on stablecoin yield and rewards, which had become the primary economic battleground between banks and crypto firms. The final committee version appears to prohibit explicit interest payments on idle balances while still allowing activity-based rewards tied to network usage or transactions. That compromise was critical in securing broader support.
Ethics provisions remained another major flashpoint throughout the hearing. Democratic senators pushed amendments aimed at preventing public officials and their families from profiting from crypto ventures while in office, alongside proposals targeting large technology firms issuing stablecoins. Those amendments ultimately failed, but the debate highlighted the extent to which crypto legislation is now intersecting with broader political and institutional concerns in Washington. DeFi treatment, developer protections, and Section 1960 language also remained areas of active negotiation.
For markets, the significance of the markup lies less in immediate legislative certainty and more in the signal it sends around the direction of US regulatory policy. The bipartisan committee vote suggests Washington is moving incrementally away from regulation-by-enforcement toward a formalised market structure framework, with most spot crypto markets likely to fall under CFTC oversight rather than the SEC. That is structurally positive for the asset class over the medium term, particularly for exchanges, custodians, and institutional investors that have operated under persistent legal ambiguity.
Even so, the path ahead remains demanding. The bill still needs to progress through the full Senate, where the 60-vote threshold remains the critical hurdle, before eventual reconciliation with the House version. While the White House continues to target a July timeline, the legislative calendar remains tight and political risks remain elevated.
The bottom line
The broader message for markets is therefore mixed. Inflation and geopolitics remain the dominant near-term macro headwinds, but the Clarity Act markup represents a meaningful improvement in the long-term regulatory outlook for digital assets in the US. In the short term, macro conditions are still likely to dominate price action, particularly after such a strong seven-week run in crypto markets.
