Bitcoin Surges to $81,000 Amid Fed Rate Hike

Bitcoin surged over $80,000 despite the Federal Reserve's rate hike and the CLARITY Act's failure in the Senate, while Ethereum funds saw significant outflows.

Bitcoin has soared past $80,000, defying the Federal Reserve's interest rate hike and the failure of the CLARITY Act in the U.S. Senate, amidst various developments over the past week.

Bitcoin Shows Promise

The leading cryptocurrency began the week around $77,000 as market participants awaited the Fed's decision on interest rates. Contrary to expectations, the Federal Reserve moved to tighten monetary policy, yet Bitcoin responded with an unexpected rise of approximately 1% instead of a drop.

Hourly BTC/USD chart from Binance. Source: TradingView.

A dip to $75,000 occurred following the Senate's procedural voting failure on the CLARITY Act. Experts linked this decline to the selling of the asset primarily by American investors.

However, on the night of September 18-19, Bitcoin surged towards $81,000, gaining around 5% and lifting the broader market with it.

By the end of the week, Bitcoin recorded a growth of over 4.8%, solidifying its position above $80,000. Other tokens like Zcash (+32%), Hyperliquid (+17%), and Solana (+8%) exhibited even more significant movements.

Source: CoinMarketCap.

During the week, spot Bitcoin ETFs attracted inflows totaling $6.21 million. The Friday session notably contributed, with investors pouring in $433 million into these products.

Source: SoSoValue.

Conversely, Ethereum funds ended a four-week streak of consecutive inflows, losing $140 million. Despite this setback, the total asset value in investment products rose from $16.3 billion to $16.7 billion due to the cryptocurrency's price increase.

Source: SoSoValue.

The cryptocurrency fear and greed index rebounded from 61 to 71 points. Despite the positive trend, the metric remains in the "moderate greed" zone.

Source: Alternative.me.

The market capitalization of digital assets increased from $2.63 trillion to $2.75 trillion. Bitcoin's dominance remained stable at 58.9%, while Ethereum's share dropped slightly to 11.5%. Bitcoin's dominance increased by 0.1%, while Ethereum's decreased.

Fed Raises Key Rate for the First Time in 2023

On September 16, the U.S. Federal Reserve raised its key interest rate by 25 basis points to a range of 3.75-4% per annum.

The Federal Open Market Committee (FOMC) unanimously approved this decision, aligning with market expectations. At the June meeting, only three members supported a rate hike, and the other nine voted to keep it unchanged.

This marks the first tightening of Fed policy since July 2023, when the central bank, led by Jerome Powell, increased the range by the same 25 basis points to 5.25%-5.5%.

Current Fed Chair Kevin Warsh reaffirmed a hawkish stance in his opening remarks, stating that the economy appears to be strengthening, yet overall financial conditions cannot be deemed restrictive. In August, at the Fed symposium in Jackson Hole, he emphasized the central bank's commitment to achieving a 2% inflation target.

The FOMC press release also highlighted an increase in economic activity, rising labor productivity, and low unemployment levels. Among the negative factors mentioned were uncertainty due to geopolitical events and rising prices.

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CLARITY Act Faces Initial Setback

On September 15, the CLARITY Act failed its first test — a procedural vote in the U.S. Senate, resulting in 49 votes in favor and 50 against. A minimum of 60 votes was needed to end debate and proceed to the bill.

Democrats opposed the bill due to concerns surrounding cryptocurrency assets and President Donald Trump's income.

Market participants expressed disappointment over the voting results. The industry is now banking on new regulations from the SEC and CFTC.

Jessica Martinez, Fireblocks' U.S. policy director, stated that the company will continue working with both agencies. Ripple CEO Brad Garlinghouse called the results "painful" and urged for clarity on the reasons behind the rejection.

Days before the vote, SEC Chair Paul Atkins promised to develop clear rules for the crypto market. However, businesses doubt that the agencies' policies will provide the same assurance to investors as a comprehensive law would.

NEAR's chief counsel, Abhishek Vaidyanathan, noted that companies are now entirely reliant on the decisions and directives of regulators.

"Firms planning budgets for 2027 will face another delay. This pushes them back to evaluating each individual case and endless legal work," he added.

Ethereum and Base Developers Abandon Unified Wallet Standard

The Ethereum and Base teams will continue to develop two separate account abstraction mechanisms — EIP-8141 and EIP-8130. Ethlabs researcher Derek Chiang announced the cessation of work on a unified solution.

Both initiatives aim to integrate some wallet functions directly into the protocol. The intention is for users to confirm transactions using access keys on their smartphones, consolidate multiple actions into a single transaction, and designate another party to cover transaction fees.

The authors of these proposals had attempted to create a unified standard for Ethereum and Base. However, negotiations concluded last week due to differing requirements for the future mechanism.

According to Chiang, Ethereum developers focused primarily on censorship resistance, privacy, and security, while Base prioritized scalability, customization, and regulatory compliance.

As a result, the teams decided to independently develop EIP-8130 and EIP-8141.

If both proposals are implemented, wallet developers will need to support two native transaction formats — one for Ethereum and another for Base.

Also on ForkLog:

Developers have moved to final testing of Bitcoin Core 32.0.
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SEC permitted limited trading of tokenized stocks.
Circle launched the mainnet of its financial blockchain, Arc.

U.S. House Committee Approves Bitcoin Reserve Bill

The U.S. House Financial Services Committee approved a bill aimed at establishing a strategic Bitcoin reserve at the federal level. The document received 28 votes in favor and 21 against.

In May, Republican Nick Begich and Democrat Jared Golden introduced the American Reserve Modernization Act (H.R. 8957). Prior to the vote, the committee approved an updated version proposed by Republican Brian Stile.

The bill is now set to be voted on by the entire House of Representatives, after which it must pass the Senate and receive the president's signature.

The legislation would require the U.S. Department of the Treasury to create a strategic Bitcoin reserve and a separate storage for other digital assets within 180 days.

Federal agencies would need to inventory the cryptocurrencies under their control. Bitcoins owned by the government and not designated by law for other purposes would be transferred to the reserve, including those that are permanently confiscated unless they are required to be returned to victims or used for legally mandated payments.

Other digital assets would be placed in a separate reserve. The Treasury would be allowed to sell these assets according to pre-approved rules. The proceeds would first cover management expenses for both funds, with the remaining amount used to reduce the national debt.

Bitcoins transferred into the reserve would be prohibited from being sold, exchanged, pledged, or used in any manner for 20 years after the law is enacted.

Weekly Summary: Fed Raises Key Rate While Bitcoin Surges to $81,000