Crypto Markets Hedge Bets on Clarity Act Passage — Market Talk
1335 ET - Investors in cryptocurrencies have been keenly eyeing the status of the Clarity Act, in hopes of long-awaited regulatory certainty allowing bigger players to move forward with investment plans. The legislation is currently scheduled to be the subject of a cloture vote next week, where some Democratic Senators are needed to join up with Republicans if there's any hope of passing the measure, says Zach Pandl of Greyscale Research in a note. But there are other options traders can still utilize, says Pandl who cites the GENIUS Act that established a federal framework for payment stablecoins, and other measures. Bitcoin falls 1.7%, ethereum is down 1.3%, XRP drops 4.1%, and solana slides 3.2%. ([email protected])1217 ET - Bitcoin is down 1.6% to $77,095, dropping after posting a strong rally over the past three weeks. The cryptocurrency seems unable to stay above the $80K mark, which is now the major psychological threshold it needs to break in order to keep the rally going. The $80K mark is where a spring rally in bitcoin topped off at in early May. "Bulls want to see Bitcoin clear this zone, which could open the door to further upside," says Bret Kenwell of eToro in a note. Ethereum is down 1.3% to $2,440, XRP is down 3.5% to $1.35, and solana slides 3% to $99.49. ([email protected])1159 ET - Markets might already be going too far, making eurozone bond market valuations increasingly attractive, Candriam CIO Nicolas Forest says after the European Central Bank's 25-basis-point rate hike. "Bond investors are pricing around 50 basis points of additional tightening, which would take the deposit rate to 3.0% by March," he says. Candriam thinks that looks stretched. Unless the inflation outlook deteriorates further or Europe faces another major energy shock, the bar for tightening beyond what is already priced remains high, he says. "This makes bond markets valuations increasingly attractive." ([email protected])1159 ET - Following June's credibility hike, the European Central Bank's interest-rate raise Thursday is about a more persistent inflation threat, Candriam CIO Nicolas Forest says. "The prolonged conflict involving Iran has pushed Brent crude above $100 per barrel, reviving inflation concerns and prompting the ECB to raise its inflation forecast for next year," he says. The key question now is whether the energy shock is spreading, he says. While so far, there is little evidence that higher energy costs are feeding meaningfully into wages or broader price pressures, "the risks are clearly tilted to the upside." A prolonged conflict, further damage to oil infrastructure, low gas inventories ahead of winter and higher food prices linked to drought could all keep inflation higher for longer, he says. ([email protected])1134 ET - The Treasury Department's $22 billion 30-year auction today will test whether investors are ready to lock up their money while bond rates are at their highest levels since 2007, BMO analysts say in a research note. Bessent's line-in-the-sand for long-bond rates looks to be 5.3%, meaning today's reopening will be a potentially crucial litmus test for his department's new activist approach to debt management, the analysts say. They expect this to be the highest yielding 30-year auction since the financial crisis. Yesterday's 10-year reopening cleared at the highest yield since 2008, the analysts say. ([email protected])1110 ET - Bitcoin's recent rally tested levels above the $80,000 mark, but it appears it's now in a consolidation phase. The cryptocurrency briefly dropped under $77k after the August PPI came in as expected, but has pared its losses since and is currently trading down 1.3% at $77,289. With more inflation data to come on Friday, and yields rising ahead of the FOMC meeting next week, investors are reluctant to put too much faith in crypto, says analysts with Glassnode in a note. "The bond market bitcoin is rallying into remains restrictive," says the firm. Bitcoin isn't expected to retest new lows for the year, with signals suggesting that the bottom is in, according to Glassnode. ([email protected])1040 ET - At the ECB's press conference, President Christine Lagarde didn't take opportunities to push back against elevated market expectations for interest rates and set a higher bar for further tightening, Pantheon Macroeconomics' Claus Vistesen says in a note. When asked whether 2.5% represents the upper end of neutral, Lagarde noted that the neutral rate is of "no great importance". "We now think the ECB will shift its policy rate more decisively into restrictive territory over the next six months," Vistesen says. He now expects a rate hike in December and another in February, before two cuts in September and December 2027. That effectively validates the market-implied path between now and March, but also that expectations for the end of 2027 remain much too high, he adds. ([email protected])1038 ET - European energy producers and insurance companies are likely to benefit due to the elevated energy prices and the European Central Bank decision to increase interest rates, eToro's Lale Akoner says in a note. The ECB raised the deposit rate to 2.5% during Thursday's policy decision, as markets expected. Sectors that could be negatively affected by the rate increase include property, housebuilders, smaller companies, and retailers, she says. "Banks may benefit initially from wider lending margins, but that advantage will fade if loan demand weakens and defaults rise." ([email protected])1022 ET - European Central Bank President Christine Lagarde's policy statement was broadly balanced, Point72's Soren Radde says. She noted that wages aren't responding to the energy-price shock while financial conditions were tightening, but also acknowledged greater inflation persistence, Radde says. The dominant theme among policymakers seems to have been concern over prolonged high inflation, rather than the magnitude of price growth or a change in view on second-round effects, he says. "Accordingly, we did not get the impression of much incremental urgency," Radde says. Indeed, Lagarde steered clear of providing rate guidance. But a December hike now seems likely, with another hike in 2027--most likely in March--very possible, he adds. ([email protected])1015 ET - Homebuying costs have hit their highest level in over a year, Redfin says. The typical U.S. homebuyer's monthly mortgage payment reached a 14-month high of $2,641. That's partly because the median home-sale price rose 2.2% year over year, and partly because the weekly average mortgage rate increased to 6.71%. Elevated costs are keeping some would-be buyers on the sidelines. Pending home sales were essentially flat from a week earlier, sitting near their lowest level since February. Buyers have negotiating power in most of the country, but for many house hunters, that isn't enough to offset high costs. Sellers are listing their homes because they want to sell before prices decline, life circumstances are prompting them to move, and the lock-in effect is easing. ([email protected])1011 ET - An interest rate increase by the European Central Bank in December looks plausible, eToro's Lale Akoner says in a note. The ECB raised the key rate to 2.5% at Thursday's rate decision, as widely expected, marking its second rate hike in 2026. Nonetheless, markets' expectations of four potential ECB rate increases this year appears excessive, Akoner says. "Europe has yet to see a convincing wage-price spiral" to justify four ECB rate rises in 2026, she says. Investors fully price in one more quarter-point rate hike by December, and a 24% chance of an additional rate increase by year end, LSEG data show. ([email protected])1004 ET - The European Central Bank's interest-rate hike to 2.5% was "unavoidable" with inflation in the eurozone currently above 3%, president of Germany's Ifo Institute Clemens Fuest says. Given that the economy remains quite weak, the rate increase comes at an inopportune time for Germany, he says. However, with core inflation--an underlying measure that strips out more volatile energy and food costs--also well above 2%, the ECB had no choice but to act, he adds. Headline inflation in the eurozone was 3.3% in August, while it was 2.9% in Germany. Risks remain to the upside for inflation, the ECB said. ([email protected])