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Ahmed Barakat
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Bitcoin has fallen 21% this year, Ethereum is down 33%, and Solana has dropped 37%, according to Bitwise Chief Investment Officer Matt Hougan’s latest CIO memo. Hyperliquid gained 72% in a single month over the same stretch, a divergence Hougan reads as a preview of what CLARITY Act passage would do to DeFi valuations relative to Bitcoin itself.
The CLARITY Act would draw a formal line between SEC and CFTC jurisdiction over digital assets, replacing years of enforcement-led regulation with a statutory framework. The House passed the bill 294-134 in July 2025, with 78 Democrats crossing the aisle, and Senate Banking Chairman Tim Scott pushed it through committee 15-9 on May 14 after nearly a year of bipartisan negotiation.
The floor is a different problem. Republicans hold 53 Senate seats against a 60-vote threshold, and only two Democrats on the committee backed the bill, leaving DeFi treatment and stablecoin rules as unresolved sticking points before any full vote.
That uncertainty is doing real damage to positioning. Hougan’s memo notes institutional capital is sitting out crypto entirely in favor of AI equities trading at record highs, a lower-friction bet that doesn’t carry the risk of a regulatory setback landing mid-quarter. Crypto ETFs are seeing outflows, and spot volumes sit at multi-year lows, conditions that typically don’t reverse until the policy question is actually resolved one way or the other.
“Crypto can survive CLARITY failing or rally if the bill passes. But it can’t thrive in the in-between,” Hougan said in the memo.
The Tokenization Case for Uniswap, Hyperliquid, and Chainlink
Hougan’s memo treats the rotation into idiosyncratic outperformers as the more interesting signal than the CLARITY Act headline itself. Hyperliquid’s 72% monthly gain and Zcash’s 50% rise didn’t track Bitcoin, Ethereum, or Solana at all, which Hougan attributes to fundamentals.
Separate reporting on Hougan’s comments, via Coinpedia, extends that thesis into a market-size argument for DeFi and infrastructure tokens specifically. Uniswap, Hyperliquid, and oracle network Chainlink currently trade as if they only ever serve crypto’s roughly $2 trillion total market.
If tokenization expands as CLARITY’s backers expect, those same protocols could plausibly start serving the equity market – around $150 trillion – or the bond market, closer to $200 trillion, forcing a repricing of the total addressable market that a compliant Bitcoin ETF simply doesn’t need.
That’s the distinction worth sitting with: Bitcoin benefits from any signal of continued U.S. support for crypto broadly, but it doesn’t need new legal plumbing to function as a settlement asset. DeFi applications and oracle infrastructure do, since institutional-scale tokenized equities and bonds require the kind of SEC-CFTC clarity that the CLARITY Act is designed to provide. That’s also where the bill’s unresolved DeFi-treatment language matters most, and it’s the same jurisdictional ambiguity delayed SEC-crypto engagement has left hanging over the sector for months.
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What Breaks the Clarity Act Stalemate
If the Senate schedules and passes the CLARITY Act before year-end, Hougan’s framework suggests DeFi and infrastructure tokens re-rate faster than Bitcoin, since their upside is tied directly to a market-size expansion Bitcoin doesn’t require. Products already built around that thesis, including Bitwise’s Hyperliquid ETF and a floated Solana ETF, given how much tokenized equity activity already runs on that chain, would gain an immediate distribution advantage.
If the bill stalls again, expect the SEC and CFTC to keep filling the gap through incremental rulemaking rather than statute, the same pattern traders have watched play out across Ripple’s own regulatory clarity push.
Hougan’s own math implies that scenario keeps institutional capital parked in AI stocks and large-cap crypto range-bound, since, per his memo, no sustainable large-cap rally arrives before Congress actually settles the question. The Senate’s next scheduling decision, not the eventual vote tally, is what traders should be watching.
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