The U.S. cryptocurrency market is facing significant headwinds as a legislative impasse over key regulatory frameworks continues, directly impacting Bitcoin's price and institutional investment flows. After a historic rally in 2025 that saw Bitcoin surge from under $70,000 to an all-time high of $126,000 in October, the flagship cryptocurrency has crashed to multi-month lows, briefly touching a 16-month low near $60,000 before stabilizing between $65,000 and $68,000.
The initial rally was fueled by political momentum following President Trump's return to office and a stated mandate to make the U.S. "the crypto capital of the world." Pro-industry appointments and early legislative efforts, including the signing of the GENIUS Act for stablecoins in mid-2025, buoyed market sentiment. However, this optimism has collided with the complex realities of U.S. policymaking.
The core of the deadlock centers on the CLARITY Act, a bill designed to resolve the long-standing jurisdictional battle between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). While the bill cleared the House in 2025, it has stalled in the Senate Banking Committee in early 2026. Its demise was accelerated by criticism from major industry players, including Coinbase, which withdrew support over controversial amendments targeting stablecoin yield programs.
A deep industry rift has emerged, as highlighted by U.S. Treasury Secretary Scott Bessent, who accused some crypto companies of actively blocking the CLARITY Act, stating they'd "rather have no bill than this bill." This sentiment echoes Coinbase CEO Brian Armstrong's public stance. Traditional finance, led by figures like Bank of America CEO Brian Moynihan, has warned that crypto yield products could drain trillions from traditional bank deposits, creating bipartisan opposition in the Senate from figures as ideologically diverse as Tim Scott and Elizabeth Warren.
A closed-door White House summit on February 10, 2026, between banking executives and crypto leaders failed to resolve the stalemate over stablecoin yields, leading to the indefinite postponement of the CLARITY Act's markup. This paralysis has left a functional regulatory framework for crypto expansion in the U.S. nonexistent.
The market impact is severe and quantifiable. According to data from SoSovalue, roughly $3 billion in net outflows have occurred from U.S.-based crypto funds since the start of 2026. Broader industry trackers indicate more than $800 billion in market capitalization has evaporated from the digital asset sector since January 1. Institutional investors, including pension funds and endowments, are now largely on the sidelines, unwilling to engage with a market in a regulatory grey zone.
Analysts describe the current environment as directionless, with the "regulatory premium" that once pushed prices higher on anticipation of a mature U.S. market now vanished. Until lawmakers break the deadlock, Bitcoin and the broader market are expected to remain range-bound, trading more on global macro signals than domestic regulatory hopes.
