A Major Bitcoin Signal Is Flashing Green

The CLARITY Act is facing its final make-or-break moment in Washington this week — and markets are recovering from the big blow up at the AI fund Situational Awareness, which offloaded its public trading book to Citadel in a firesale.

But as we discussed today with Dragonfly GP Rob Hadick — that may be a sign of the tides starting to turn in crypto’s favor. If things look shakier and shakier in the AI trade, where will those funds rotate next? One signal seems to be screaming that the answer will be Bitcoin.

Crypto investor Luke Martin recently flagged that Bitcoin’s realized volatility vs. that of tech stocks (as measured by the Nasdaq-100 QQQ ETF) has reached a cycle low. Historically, as Martin points out, that has been a very solid buy signal.

In fact, pulling all of the times Bitcoin’s realized volatility flipped below the QQQ (n=10), Martin points out that forward returns average more than 730% with a 100% win rate.

https://x.com/VentureCoinist/status/2084250983517876665?s=20

This week, we chatted with Dragonfly’s Rob Hadick about that phenomenon, and how the rise of the AI bubble sucked all the excitement right out of crypto. Given the blowup at Situational Awareness last week, Hadick says some investors are starting to become more fearful of whether the exuberance may be running its course.

That could bode well for crypto and the Bitcoin trade, he says.

“Do I think things will get better? Absolutely. But I think it has far more to do with when does the equity markets’ volatility go down? When does the AI bubble burst a little bit? When do people get a little bit more jaded on other markets? And when do they want to switch back to trading other things?” he told us on today’s show. “Until that happens, the volume will probably continue to be a little bit muted. If people want to trade Micron and SK Hynix and we see all of these things perform and behave the way they have, that’ll be where most of the volume sits.”

Strategy Drops $104M In Bitcoin

If there is one Bitcoin overhang that is continuing to be lifted, it’s the market becoming numb to seeing the largest public holder in Strategy dump parts of its stash.

This morning, the company announced it sold another $104 million in Bitcoin to boost its cash reserves. The memes around it were pretty good, considering Strategy sold the Bitcoin it bought at $75,419 for an average price of $63,957.

But nonetheless, shares in Strategy’s perpetual preferred stock STRC reclaimed the $90 handle for the first time since mid-June, as the company also announced it used $52.3 million from the Bitcoin it sold to buy back shares.

The CLARITY Act’s Race Against the Clock

This week is the final week before the Senate’s August recess. Hopes for the CLARITY Act are hanging by a thread as the crypto industry awaits a cloture vote to move the bill forward.

The hope is that the last bipartisan compromise on ethics was enough to both get moderate Democrats to hold their nose and vote yes, while also being palatable for President Trump. But as Punchbowl’s Brendan Pedersen points out — the progressive Democrat wing, led by Sen. Elizabeth Warren, is making a strong push to threaten anyone who breaks ranks.

[T]he political risks facing moderates have grown week by week. An insurgent left has toppled establishment and incumbent candidates across the country. We’ve already seen an uptick in anti-crypto political ads, including in the competitive Senate primary between Rep. Angie Craig (D-Minn.) and Lt. Gov. Peggy Flanagan.

… “More people in the Senate are beginning to question crypto’s electoral invincibility,” Warren said.

As Solana Institute President Kristin Smith reminded us, there’s still a path for CLARITY even if the vote doesn’t happen — it just gets a lot harder. Then again, with more Senate Republicans pushing Majority Leader John Thune to delay the August recess before it’s set to begin on Friday, it’s kind of anyone’s guess as to what happens this week.

Elsewhere on The Street…

• Stablecoin giant Circle is the new focus of a few different analysts on Wall Street. Today, TD Cowen initiated CRCL with a buy rating and a price target of $82, implying roughly 30% upside in the stock. From CNBC’s Fred Imbert:

  “We see a compelling combination of attractive growth + diversification via USDC circulation, rapidly growing high margin fee-based revenues & Arc optionality and think the Street underestimates the evolution into a platform player,” wrote analyst Bryan Bergin in a note.

  But not everyone is as bullish on a CRCL comeback as other fintech giants continue to pile in. For example, Morgan Stanley downgraded the stock to underweight from equal weight and cut its price target to $38 from $106.

  “Stablecoin activity remains overwhelmingly skewed toward crypto trading and transfer activity rather than payments. McKinsey estimates roughly $35T of adjusted volume, of which only $390B represents identifiable payments (which [we] still think may be optimistic), or roughly 0.5% of unadjusted activity and about 1% of adjusted activity,” he wrote to clients.

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