Bitcoin Surges Past $81K as Clarity Act Boosts Momentum

Bitcoin surged past $80,000, reaching a more than three-month high on Tuesday as a soft U.S. dollar and debasement fears revived momentum in the crypto sector. The world's largest cryptocurrency hit a peak of $81,237.94 in Asian hours, marking its highest level since mid-May.

The rally comes amid significant developments in Washington, where President Trump urged Congress to pass the Clarity Act, which would define whether cryptocurrencies qualify as securities or commodities. Since then, Bitcoin has risen 16%, pushing through resistance levels that had held since early June.

Gold also saw a substantial increase, rising to a three-month high as investors sought safe-haven assets amid the soft dollar and bond market turbulence. The Treasury Department's announcement last week to buy back more long-dated bonds aimed to cap gains in long-end yields, which has led to increased investor interest in both Bitcoin and gold.

The rally in Bitcoin was amplified by a massive short squeeze, with roughly $2.7 billion in crypto short positions liquidated, according to CoinGlass. The Clarity Act, if enacted, would clarify jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission over the cryptocurrency sector.

Analysts noted that the Treasury's actions have reinforced market views that U.S. policymakers may have a lower tolerance for further rises in long-end yields through the midterm elections. This has created a relatively supportive macro backdrop for assets like Bitcoin and gold, according to Tim Sun, senior researcher at HashKey Group.

U.S. debt dynamics have shifted significantly over recent decades, with federal debt growing faster than the economy due to spending during financial crises and tax cuts. The current annual deficit is close to 6% of GDP, which economists consider a higher risk for debt sustainability compared to the traditionally manageable 3%. About $8 trillion of the total outstanding debt is money the government owes itself, while public debts amount to roughly 100% of annual GDP.

The U.S. maintains certain advantages as the issuer of the world's main reserve currency, but rising interest rates and higher borrowing costs have narrowed its advantage over competing debtors. The share of GDP going to pay interest has doubled to around 3%, reflecting high deficits, growing debt, and higher interest rates.

Markets are starting to focus on the upcoming midterm elections, which could shift control of Congress away from President Trump and the Republican Party. Democrats are favored to win at least one chamber, potentially leading to a divided government that could block major non-bipartisan measures and create volatility in capital markets. Analysts suggest that a shift in power could result in lengthy standoffs over raising the debt ceiling and more executive actions from President Trump.

President Trump's market-moving executive actions, such as his tariff campaign, have had significant impacts on markets. While divided government typically tempers federal actions, Trump's use of executive authority could lead to increased volatility. The S&P 500 has historically performed better under divided Congresses, but the current political landscape adds uncertainty.

The U.S. is expected to reach its debt ceiling of $41.5 trillion in midyear 2027, requiring Congress to authorize more borrowing. A divided government could make raising the debt ceiling contentious, potentially increasing market volatility and raising rates on Treasurys. Investors are also watching for a potentially contested or delayed election call, which could disrupt markets.