Bitcoin and Ethereum paused their July rebound as Middle East tensions reignited and uncertainty mounted over the US Clarity Act's passage in early August. Bitcoin, which hit its lowest point of the year at 88 million won on the 1st of last month, climbed over 10% to the 97 million won range by the 22nd, while Ethereum surged approximately 19% from the 2.3 million won range to around 2.8 million won during the same period. The renewed Middle East crisis triggered a surge in oil prices, raising inflation concerns that could derail anticipated Federal Reserve rate cuts and complicate the crypto market's trajectory. Additionally, the Clarity Act—expected to clarify digital asset classification and reduce regulatory uncertainty—faced last-minute obstacles in the US Senate due to partisan disagreements over ethics provisions and anti-money laundering requirements.
Bitcoin and Ethereum Post Double-Digit Gains in July
Bitcoin, which fell to the 88 million won level on the 1st of last month and marked its lowest point of the year, rose to the 97 million won range by the 22nd, gaining over 10% in approximately 20 days. Ethereum also climbed about 19% during the same period, rising from the 2.3 million won range to around 2.8 million won.
Compared to equity markets, the crypto market showed resilient performance throughout July. The KOSPI index dropped 20% from 8600 to 6800 during the period, while the US S&P 500 index remained flat around the 7500 level.
Oil Price Surge and Inflation Fears Threaten Crypto Rally
Recent clashes between the US and Iran drove oil prices sharply higher, reigniting inflation concerns and placing the crypto market's direction at a crossroads. While the upcoming Federal Open Market Committee (FOMC) meeting at the end of this month is expected to maintain current rates, sustained high oil prices could make a rate hike in the second half of the year a reality.
On July 23 (local time), the federal funds rate futures market reflected on the Chicago Mercantile Exchange (CME) FedWatch showed approximately 82% probability that the Federal Reserve would raise the benchmark rate by 0.25 percentage points in September. This probability was below 53% just a week earlier but jumped 30 percentage points due to heightened Middle East tensions.
US Clarity Act Faces Partisan Delays Ahead of Senate Recess
The Clarity Act, which had generated expectations for passage before the US Senate's recess in early August, is experiencing last-minute difficulties that are increasing market uncertainty. Republicans added ethics provisions to restrict public officials from issuing coins, but Democrats are demanding additional user protection and anti-money laundering (AML) strengthening measures, causing obstacles in processing the bill.
The legislation clarifies standards for classifying digital assets as securities or commodities. The crypto industry anticipates that once securities-related controversies are resolved and regulations become clear, benefits such as increased investment attraction and user expansion will follow.
Analysts Diverge on Crypto Market Outlook Amid Policy Uncertainty
Market forecasts are divided ahead of major variables. Predictions split between expectations of further declines due to potential US rate hikes and Clarity Act passage delays, versus forecasts of second-half gains based on the crypto market's rebound despite recent stock market weakness and institutional fund inflows.
Zach Pandl, Head of Research at asset manager Grayscale, stated, "If the US economy maintains stable growth and the Fed holds the benchmark rate steady, it's possible the bottom has already occurred," while adding, "Resumption of rate hikes and delays in Clarity Act legislation pose additional downside risks."
In contrast, on-chain analytics firm Glassnode noted in a report, "Bitcoin recorded relative strength for two consecutive weeks, showing more resilient performance than US and European stock markets despite the adverse factor of international oil prices surging due to recent Iran-related geopolitical risks." The firm added, "Price increases despite negative factors suggest that selling pressure in the market has been substantially relieved."
FAQ
What price movements did Bitcoin and Ethereum show in July?
Bitcoin rose over 10% from 88 million won on the 1st of last month to the 97 million won range by the 22nd. Ethereum climbed approximately 19% from the 2.3 million won range to around 2.8 million won during the same period.
Why is the US Clarity Act facing delays?
The Clarity Act is experiencing difficulties in the US Senate because Republicans added ethics provisions restricting public officials from issuing coins, while Democrats are demanding additional user protection and anti-money laundering (AML) strengthening measures, creating partisan disagreements that have stalled the bill's passage before the early August recess.
What is the probability of a Federal Reserve rate hike in September?
On July 23 (local time), the CME FedWatch federal funds rate futures market reflected approximately 82% probability that the Federal Reserve would raise the benchmark rate by 0.25 percentage points in September, up from below 53% a week earlier due to heightened Middle East tensions.
