Bitcoin at risk of a "sell the fact" reaction on the CLARITY Act vote as FOMC decision looms

FUNDAMENTAL OVERVIEW   Bitcoin has shown notable resilience over the past week despite a backdrop that would normally be challenging for risk assets. The higher-than-expected US monthly core inflation has pushed rate hike expectations higher, while oil prices above $100 are adding to inflation concerns and reinforcing a more hawkish monetary policy outlook. Yet Bitcoin has largely held up, suggesting that crypto-specific catalysts may be helping offset the deteriorating macro backdrop. One potential factor is growing optimism around the CLARITY Act. The CLARITY Act is designed to establish a clearer regulatory framework for digital assets in the US. Among its key objectives is drawing a clearer line between the jurisdictions of the SEC and CFTC. The legislation also aims to establish regulatory requirements for crypto exchanges, brokers and dealers. The potential benefit for the broader crypto market is regulatory certainty. Clearer rules could reduce the risk that exchanges, financial institutions and asset managers face unexpected regulatory action, while making it easier for traditional financial firms to build and offer crypto-related products. The SEC itself has said that legislation is needed to establish durable, "future-proofed" rules for the sector and has expressed support for the CLARITY Act. That could ultimately support greater institutional participation, deeper liquidity and more capital flowing into digital assets. Tomorrow, at 2:15pm ET, the CLARITY Act will face its first real Senate test with the cloture vote. Cloture requires 60 votes just to open debate on the legislation. If the vote fails, it could effectively close the legislative window for crypto market structure this year, given the November midterms, and that is likely to trigger a selloff in Bitcoin. Even if the vote is successful, I’m afraid we could see a “sell the fact” reaction, with Bitcoin falling as the focus will quickly turn to the FOMC decision on Wednesday.   BITCOIN TECHNICAL ANALYSIS – DAILY TIMEFRAME On the daily chart, we can see that Bitcoin is bouncing from the major 76,000 support. We can expect the buyers to step in around these levels with a defined risk below the support to position for a rally back into the 82,500 resistance. The sellers, on the other hand, will want to see the price breaking below the support to pile in for a drop into the 67,000 support next. BITCOIN TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME On the 4 hour chart, we can see the price is breaking above the downward trendline that was defining the bearish momentum. The buyers will likely pile in on the break with a defined risk below the broken trendline to keep targeting the resistance. The sellers, on the other hand, will need to wait for a break below the support to open the door for new lows. BITCOIN TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME On the 1 hour chart, the price is breaking above the minor resistance zone around the 77,600 level. Again, this is where we can expect the buyers to step in with a defined risk below the broken trendline to keep pushing into new highs. The sellers, on the other hand, will either wait for the price to come into the resistances or break below the support to target new lows. UPCOMING CATALYSTS Tomorrow, we have the cloture vote onCLARITY Act. On Wednesday, we have the FOMC rate decision. On Thursday, we get the US Jobless Claims figures. Traders will also keep a close eye on developments in the Middle East. This article was written by Giuseppe Dellamotta at investinglive.com.