Clarity Act Rejection Shakes Ethereum Price

Ethereum (ETH) and the wider cryptocurrency market faced turbulence after the Clarity Act failed to pass the Senate, a measure analysts had previously viewed as crucial for the second-largest cryptocurrency.

The anticipated rally from the bill's passage has now been revised. The setback left an impact on ETH, with prices declining approximately 3% over the past week. Following the Clarity Act's rejection, altcoins dropped to $2,388 before rebounding to $2,400. Meanwhile, major altcoins like XRP and Hyperliquid fell more than 8%.

U.S.-listed spot Ethereum funds also saw significant sell-offs, recording their largest outflow since January after the bill's cancellation. While ETH had already been declining before the Senate vote, the price drop intensified afterward.

CryptoQuant data revealed that approximately 709,400 ETH moved to Binance on September 11, marking a daily high since June and occurring four days before the vote. Large inflows into exchanges could signal increased potential sell pressure, though not necessarily immediate selling.

The Clarity Act rejection has removed short-term catalyst potential for ETH, but long-term supply dynamics remain unchanged. CryptoQuant reported exchange holdings at 14.6 million ETH, a post-2016 low, with holdings steadily declining since 2022. This week's inflow was relatively minor compared to the trend.

Staking continues to absorb supply, with over 43 million ETH staked—representing about 35% of total supply, a record high according to analyst Leon Waidmann. Coins held by Valdata cannot be sold until queues are resolved, reducing available tradable ETH.

Indicators have improved as well. Analyst MorenoDV noted that ETH's MVRV ratio has exceeded 1 and maintained this level across multiple sessions, with prices trading above the $2,300 mark. However, signals remain mixed: CryptoQuant's Coinbase Premium Index stands at -0.08, indicating weaker U.S. spot demand compared to global markets.

While ETH supply conditions remain positive, clear demand has not yet emerged to counter recent sell pressure. Grayscale's research head stated that crypto can grow without the Clarity Act, shifting focus back to macroeconomic factors. With Washington stepping aside as a variable, interest rates may become the key driver for ETH as the Federal Reserve recently raised rates for the first time in this cycle.