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Citi (C) says CLARITY Act momentum builds, but DeFi fight could stall crypto bill

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Citi (C) says CLARITY Act momentum builds, but DeFi fight could stall crypto bill

Citi (C) said the CLARITY Act remains the key catalyst for legitimizing digital assets in the U.S., but progress is slowed by negotiations over its most contentious provisions.

While the Senate Agriculture Committee has advanced its version of the bill, the bank noted the Banking Committee still controls the toughest issues, leaving timelines uncertain.

Lawmakers are expected to keep working even during a potential shutdown, with target dates in the coming months still attainable, though there is a rising risk that talks delay final passage beyond 2026.

“We see the passage of the CLARITY Act as the essential catalyst for advancing/legitimizing digital assets,” analysts led by Peter Christiansen said in the Friday report.

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Crypto market structure legislation aims to define who regulates digital assets in the U.S., how tokens are classified and which activities fall under securities or commodities law. The framework is critical to giving crypto firms and investors legal clarity, reducing regulatory overlap and bringing activity back into the country after years of enforcement-driven oversight drove companies abroad.

The bill’s supporters argue that clear rules will unlock institutional adoption, encourage innovation and curb offshore risk, while critics warn that poorly drawn lines could stifle decentralized technologies.

The analysts flagged decentralized finance (DeFi) definitions as the biggest hurdle, with debate focused on defining the point at which decentralized protocols, software and developers become regulated service providers.

An overly restrictive framework could weigh on Web3 development, decentralized exchanges, derivatives, stablecoin yield and layer-2 networks, with any compromise likely to hinge on custody and surveillance rather than pure software neutrality, the analysts said.

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The analysts also said they see more scope for compromise on stablecoin rewards, suggesting options such as time-limited yield or alternative incentive structures, even as banks warn of regulatory arbitrage and crypto firms argue rewards are key to adoption. Citi said the issue does not undermine its longer-term view on cross-border and business-to-business stablecoin use.

On tokenized equities, the report said fears of bypassing traditional market infrastructure have driven resistance, but potential workarounds include clearly classifying tokens as securities, keeping distribution within existing rails, using hybrid settlement models or launching an SEC pilot. Such approaches could support innovation without upending the securities value chain, the report added.

Coinbase’s (COIN) decision to end support for U.S. market structure legislation won’t derail the process, investment bank HSBC said in a report earlier this week, suggesting that while the exchanges CEO, Brian Armstrong, prefers no bill over a bad bill, he would probably accept a sensible compromise.

Read more: Coinbase opposition won’t stymie U.S. crypto market structure bill, HSBC says

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ME Token Slumps After Magic Eden Announces Buybacks, Staking Rewards

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ME Token Slumps After Magic Eden Announces Buybacks, Staking Rewards


The former NFT marketplace said it will allocate revenue to the ME ecosystem, including USDC rewards paid out to stakers.

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Solana (SOL) Plunges Below $100, Bitcoin (BTC) Recovers From 15-Month Low: Market Watch

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BTCUSD Feb 4. Source: TradingView


Meanwhile, HASH and HYPE have declined the most over the past 24 hours after charting impressive gains lately.

Bitcoin’s adverse price actions as of late worsened yesterday when the asset tumbled to its lowest positions since early November 2024 at $73,000 before recovering by a few grand.

Most altcoins followed suit with enhanced volatility, but some, such as SOL, HYPE, and CC, have been hit harder than others.

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BTC’s Latest Rollercoaster

It was just a week ago when the primary cryptocurrency challenged the $90,000 resistance ahead of the first FOMC meeting for the year. After it became official that the Fed won’t cut the rates again, BTC remained sluggish at first but started to decline in the following hours.

The escalating tension in the Middle East was also blamed for another crash that took place on Thursday when bitcoin plunged to $81,000. It bounced off to $84,000 on Friday but tumbled once again on Saturday, this time to under $75,000. Another recovery attempt followed on Monday, only to be rejected at $79,000.

Tuesday brought the latest crash, this time to a 15-month low of $73,000. It has rebounded since then to just over $76,000, but it’s still 3% down on the day. Moreover, it has lost 14% of its value weekly and a whopping 18% monthly.

Its market capitalization has plummeted to $1.525 trillion on CG, while its dominance over the alts has declined to 57.3%.

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BTCUSD Feb 4. Source: TradingView
BTCUSD Feb 4. Source: TradingView

SOL Below $100

Most larger-cap altcoins have felt the consequences of the violent market crash lately. Ethereum went from over $3,000 to $2,100 in the span of a week, before bouncing to $2,280 as of now. BNB is down to $760, while SOL has plummeted to under $100 after a 7% daily decline.

Even the recent high-flyer HYPE has retraced hard daily. The token is down by 11% to $33. CC and ZEC are also deep in the red, while XMR has gained the most from the larger caps.

The cumulative market cap of all crypto assets has seen more than $70 billion erased in a day and is down to $2.65 trillion on CG.

Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto
Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto

 

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Pumpfun Unveils Investment Arm and $3 Million Hackathon

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Pumpfun Unveils Investment Arm and $3 Million Hackathon


PUMP rallied as much as 10% but erased its gains as crypto markets dipped.

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Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

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Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

Assets in spot Bitcoin (BTC) ETFs slipped below $100 billion on Tuesday following a fresh $272 million in outflows.

According to data from SoSoValue, the move marked the first time spot Bitcoin ETF assets under management have fallen below that level since April 2025, after peaking at about $168 billion in October

The drop came amid a broader crypto market sell-off, with Bitcoin sliding below $74,000 on Tuesday. The global cryptocurrency market capitalization fell from $3.11 trillion to $2.64 trillion over the past week, according to CoinGecko.

Altcoin funds secure modest inflows

The latest outflows from spot Bitcoin ETFs followed a brief rebound in flows on Monday, when the products attracted $562 million in net inflows.

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Still, Bitcoin funds resumed losses on Tuesday, pushing year-to-date outflows to almost $1.3 billion, coming in line with ongoing market volatility.

Spot Bitcoin ETF flows since Jan. 26, 2026. Source: SoSoValue

By contrast, ETFs tracking altcoins such as Ether (ETH), XRP (XRP) and Solana (SOL) recorded modest inflows of $14 million, $19.6 million and $1.2 million, respectively.

Is institutional adoption moving beyond ETFs?

The ongoing sell-off in Bitcoin ETFs comes as BTC trades below the ETF creation cost basis of $84,000, suggesting new ETF shares are being issued at a loss and placing pressure on fund flows.

Market observers say that the slump is unlikely to trigger further mass sell-offs in ETFs.

“My guess is vast majority of assets in spot BTC ETFs stay put regardless,” ETF analyst Nate Geraci wrote on X on Monday.

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Source: Nate Geraci

Thomas Restout, CEO of institutional liquidity provider B2C2, echoed the sentiment, noting that institutional ETF investors are generally resilient. Still, he hinted that a shift toward onchain trading may be underway.

Related: VistaShares launches Treasury ETF with options-based Bitcoin exposure

“The benefit of institutions coming in and buying ETFs is they’re far more resilient. They will sit on their views and positions for longer,” Restout said in a Rulematch Spot On podcast on Monday.

“I think the next level of transformation is institutions actually trading crypto, rather than just using securitized ETFs. We’re expecting the next wave of institutions to be the ones trading the underlying assets directly,” he noted.