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Crypto Stocks Decline on Clarity Act Stablecoin Concerns

COIN and Circle tumbled on proposed legislation restricting stablecoin rewards

Crypto Market Overview

Bitcoin sank below $70,000 on Tuesday amid broader market pressure, though Bernstein analysts believe the worst of the correction is likely over. The token has outperformed gold and equities during the Middle East conflict but faced selling pressure as crypto-related stocks tumbled on regulatory concerns.

Bitcoin & Ethereum

Bitcoin traded below $70,000 as Bernstein analysts said the token "looks bottomed" with fresh upside ahead. The firm highlighted that the largest corporate Bitcoin holder continues to expand its treasury, signaling confidence that the bottom is likely in.

Crypto Stocks

$COIN fell 10.5% after reports surfaced about proposed legislation that could affect stablecoins, a key part of its business. Circle Internet Group fell 20%, its largest decline on record, while $MSTR remains down 56.9% year-to-date despite Bernstein noting Strategy's resilience and its flagship preferred share as an alternative funding source. Bernstein highlighted Strategy's position as the largest U.S. equity issuer for two consecutive years as it continues buying Bitcoin.

Regulation & Policy

Crypto stocks tumbled on Tuesday after reports emerged of a compromise on the Clarity Act that would ban stablecoin rewards on platforms like Coinbase except in specific instances. Coinbase had previously pulled its support for the legislation, which is intended to set a framework for regulating the crypto industry. Circle, the issuer of the second-largest stablecoin USDC, was hit hardest by the news.

Looking Ahead

Market participants will closely monitor developments around the Clarity Act compromise and its final provisions on stablecoin rewards. Bernstein's view that Bitcoin has bottomed suggests potential upside if regulatory clarity improves, while Strategy's continued accumulation strategy faces three "narrative barriers" that institutions still perceive as risks, according to Bloomberg ETF expert James Seyffart.

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Cryptoassets are high risk and largely unregulated. Do not invest unless you are prepared to lose all the money you put in. Prices are extremely volatile, and you should not expect protection from the UK Financial Services Compensation Scheme or the Financial Ombudsman Service if something goes wrong.

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