Tuesday was one of the most important days of the year for the cryptocurrency industry, as the US Senate was scheduled to vote on the key market-structure legislation, the CLARITY Act, which, unfortunately for its backers, went sideways.

The Senate rejected cloture on the motion to proceed with the bill, with the vote falling well short of the 60 votes required. BTC reacted with an immediate price drop, but there’s more to the story.

STHs Capitulate

According to CryptoQuant’s analyst Darkfost, Bitcoin short-term holders sent over 23,000 BTC to exchanges at a loss following the Senate setback. In USD terms, this massive stash was worth close to $1.8 billion. This represented the largest capitulation event in about a month.

STHs are generally more sensitive to sudden price movements, making their behavior expected and also useful for tracking periods of fear and forced selling, CQ explained. The reaction on September 15 is particularly worth observing because this cohort of investors spent almost a month in partial profit before yesterday’s price decline, the longest sustained profitable period of the year.

The CLARITY disappointment therefore quickly tested these investors’ confidence, which had accumulated during BTC’s latest recovery. Nevertheless, it’s still worth noting that exchange deposits do not necessarily prove every unit was subsequently sold. Instead, they represent potential selling pressure rather than confirmed disposals.

Investors Reacted Before the Vote

Santiment Intelligence’s data shows that the market started to react even before the final vote came in. Just a day before the Senate rejected cloture on the bill, BTC rocketed to over $79,500. However, selling accelerated at this point as doubts emerged that the CLARITY Act could gather the necessary support despite the last-minute changes.

Later, on September 15, the cryptocurrency had already retreated to $76,000. Santiment argued that traders were repricing the deteriorating probability of passage before cloture officially failed, and social activity confirmed it.

Discussion surrounding the bill exploded after the failure and was significantly higher than when the legislation advanced through the Senate Banking Committee in May. The analysts said the reaction illustrates clearly how strongly traders respond when anticipated bullish catalysts suddenly disappear.

Nevertheless, yesterday’s setback, albeit being a major one, does not mean the bill is dead. The failed vote delays the process rather than permanently rejecting the entire legislation, and another attempt remains procedurally possible. Still, the negative impact was felt immediately, while all eyes in crypto now turn to the Fed and the FOMC meeting today.

Source: CryptoPotato