Bernstein Warns Of A Short Term Crypto Correction

The crypto market could lose its main political catalyst in the United States. A few days before the Senate’s parliamentary recess, the adoption of the CLARITY Act is slipping away, reigniting fears of a regulatory vacuum. For Bernstein analysts, this deadlock risks triggering an immediate correction in bitcoin and altcoins. Behind this short-term threat, however, lies a more nuanced scenario, where a legislative setback today could still reshuffle the cards for the crypto industry in the coming months.

In Brief

• The anticipated failure of the CLARITY Act in the US Senate threatens to cause a sharp and immediate drop in crypto prices before the summer parliamentary break.
• Faced with this legislative deadlock, investors anticipate a market bottom before hoping for a tactical rebound between late third quarter and early fourth quarter 2026.
• To fill this political void, the SEC and CFTC are preparing to take over through the Project Crypto initiative in order to offer a direct regulatory framework to DeFi actors and token issuers.
• This blockage at the Capitol is primarily explained by pressure from the traditional banking lobby against stablecoin yields and by fierce ethical disagreements between Democrats and Republicans.

CLARITY Act: a threat to prices and the collapse of market confidence

Inaction by the US Congress threatens to trigger a negative reflex reaction within the crypto industry. According to Bernstein, the Senate’s inability to pass the CLARITY Act before the summer recess risks causing a new drop in overall sector valuations. The firm’s forecasts fit into a very specific timeline.

In their note addressed to investors, Bernstein analysts state : “From a tactical point of view, we expect the crypto market to reach its bottom before regaining momentum towards the end of the third quarter and early fourth quarter, ahead of the midterm elections.” The market will therefore need to show resilience by going through a potential purge phase before hoping for a momentum return approaching the midterm election deadlines.

This caution shown by analysts is based on a marked deterioration of confidence indicators across the sector:

• Marked pessimism in prediction markets: on the Polymarket platform, the probability of the CLARITY Act being enacted by the end of the year has dropped to only 27%, reflecting a 7% decline over a week and 9% over a month, with nearly $3.7 million committed by bettors ;
• Anticipated institutional revisions: as early as June 26, investment firm Galaxy Digital had revised down its estimates to a 50% chance of adoption in 2026, warning that the Senate was running out of time before its summer break.

The regulatory pivot of the SEC and CFTC via Project Crypto

Faced with legislative inertia, regulation of the sector could paradoxically accelerate under the direct impetus of federal agencies. Bernstein highlights that the blockage in the Senate could prompt the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to adopt a proactive stance and accelerate their rule-making initiatives within “Project Crypto”.

This joint program, initially announced by SEC Chairman Paul Atkins in July 2025 and then extended to the CFTC in September 2025, aims to build a functional framework by leveraging the existing prerogatives of both agencies. According to the report, regulators could multiply interpretative directives on token taxonomy, clarify regulation of decentralized finance (DeFi) and accelerate the application of the innovation exemption, a mechanism allowing certain tokens to escape securities status for a specified period.

The technical details provided by analysts show that this transition to agency regulation is a pragmatic alternative while Congress reworks its text. By clarifying token classification and offering a temporary safe framework for crypto issuance, the SEC and CFTC intend to avoid a prolonged legal vacuum. This joint initiative would maintain a minimal level of innovation on US soil without waiting for the conclusion of a heavy and uncertain legislative process at the Capitol.

Banking blockages and political deadlock in Washington

The blockages paralyzing the text in the Senate stem from fierce opposition from the traditional banking sector and complex political negotiations in Washington. The American Bankers Association (ABA) and several state banking groups have heavily criticized the project provisions relating to stablecoins, arguing that the current draft would allow crypto companies to offer yields on these assets without being subject to the same regulatory constraints as banks.

At the same time, the political aspect has been complicated by ethical considerations. According to information reported by journalist Eleanor Terrett, the White House is reviewing a bipartisan ethical counter-proposal resulting from discussions between Republican Senator Thom Tillis and Democrat Ruben Gallego.

This counter-proposal introduces a new legal dimension that further complicates the path of the bill. The proposed compromise would notably allow state attorneys general to sue the Department of Justice if it fails to enforce ethics rules on federal officials. This overlap of financial issues, related to competition between banks and stablecoin issuers, and political quarrels about federal ethics largely explains the deadlock of debates in the Senate.

Thus, the US parliamentary impasse reveals a major transition in crypto governance in the United States. While legislative delay imposes immediate downward pressure on prices, the crypto ecosystem could find a second wind through direct regulatory clarification initiated by the SEC and CFTC.

If the prospect of a market bottom between the end of the third quarter and early fourth quarter seems to be confirmed according to Bernstein, the regulators’ ability to provide operational exemptions for DeFi and token creation will determine how fast the industry can start its recovery before the midterm election deadlines.