Clarity Act Scheduled for September Vote, Ethereum Staking Controversy Amidst Oil Price Volatility

The Clarity Act has become difficult to pass the Senate within August, but the bill itself has not been scuttled. Senator Thune's office informed the industry of its intention to submit a cloture motion (a motion to end debate) to begin deliberations on the bill before the August recess. This is interpreted as an intention to proceed as much as possible with the procedure, even if final passage in August is difficult, and to push for a vote immediately when the National Assembly reconvenes in September.

There are two main remaining issues for the passage of the Clarity Act. The first is the stablecoin yield problem; concerns are being raised even within the Republican party that crypto companies' stablecoin rewards could compete with bank deposits. The second is the ethics clause, with demands to restrict crypto businesses for public officials, including the president, and their families, for which the White House's final stance has yet to be announced.

Recently, a security incident occurred with the Coldcard hardware wallet, resulting in the theft of approximately $100 million worth of Bitcoin. In this incident, random numbers were supposed to be generated with 128-bit difficulty, but older versions generated random numbers with 40-bit difficulty, and newer versions with 72-bit difficulty, causing issues from the seed generation stage, which allowed attackers to steal Bitcoin. This incident raised awareness that hardware wallets are not unconditionally safe, with confirmed damages exceeding 1,719 Bitcoins, worth approximately $100 million at current value.

Ethereum spot ETFs have seen a net inflow of $245 million, receiving positive evaluations from institutional investors alongside Bitcoin. However, a new proposal called EIP-8363 has become the center of controversy in the Ethereum market. This proposal suggests reducing staking rewards as the amount of staked Ethereum increases and is currently facing overwhelming opposition from 99% of stakeholders.

If the EIP-8363 proposal is passed, new Ethereum issuance will decrease as the staking ratio increases, creating a structure where new issuance rewards would be almost nil if 50% of all Ethereum were staked. Joseph Shalom of Sharp Link opposed this proposal, arguing that Ethereum is not just an asset expected to appreciate in price but an asset that generates income, distinguishing it from Bitcoin. He pointed out that if staking yields decrease, institutional investors would lose their justification for buying Ethereum.

The revenue structure of the crypto industry is changing. From 2021 to 2023, blockchain networks themselves accounted for a large portion of fees, but by 2026, this trend is expected to change, with the proportion of blockchain revenue decreasing to 25%. This gap is being filled by financial and consumer apps, showing that the sources of revenue generation in the crypto market are gradually diversifying.

Monad, an alt chain, is performing well amidst the sluggishness of other alt layers excluding Bitcoin and Ethereum. It attracted $500 million in deposits within a month of its launch, showing rapid growth with $100 million in 48 hours and $500 million in 4 weeks. Currently, active loans amount to $215 million, with a high utilization rate of 43%. Maple Finance has played the biggest role in this growth, performing well not only on Ethereum and Solana but also on Monad. The synthetic stablecoin created by Maple Finance accounts for about 40% of Monad's total deposits and is actively used. This rapid growth seems to be due to the incentives Monad provided early on, and it remains to be seen if this growth will continue.

Former President Donald Trump's plan for a large-scale air strike on Iran was ultimately canceled. Major reasons for the failed strike included strong opposition from Gulf states, and Iran's threat to retaliate by destroying essential infrastructure such as desalination plants or power facilities in Gulf states. In particular, Saudi Arabia's opposition to the U.S. airstrike made it difficult for the U.S. to disregard its stance. Consequently, the strike plan, which had been coordinated with Israel, was withdrawn, leading to a sharp drop in oil prices. The decline in oil prices raised expectations for price stability, acting as a factor to lower the probability of benchmark interest rate hikes.

Iran maintains that the Strait of Hormuz transit fee issue should be decided through an agreement between Oman and allied nations, not with the U.S. Currently, Iran is demanding 5-7% of the value of goods loaded on ships passing through as a transit fee, while Oman is proposing 3%. Considering that West Texas Intermediate (WTI) closed at $77 on Friday, 7% amounts to approximately $4-5.5 per barrel. This is much higher than the 1% transit fee ($1 per barrel) when WTI was $100 in the past.

Negotiations between Iran and Oman on transit fees are still ongoing, but Iran claims that even after an agreement with Oman, the opening of the Strait of Hormuz depends on the lifting of the blockade imposed by the U.S. Iran is trying to generate revenue through transit fees but is reluctant to pay a price to the U.S. for lifting the blockade. Meanwhile, oil prices dropped to $72 during the week before rebounding to $77 on Friday.

The current situation shows a positive aspect of the Middle East conflict moving towards a truce, but it is uncertain whether the U.S. will accept Iran's demand for a 5-7% transit fee. The U.S. position is that passage through the Strait of Hormuz should be 'free'.

The U.S. government cannot condone Iran's demand for a Strait of Hormuz transit fee. If the U.S. were to accept this demand, other countries could also demand similar transit fees, potentially causing significant chaos in international maritime order. The Strait of Hormuz is not owned by any single nation, so the U.S. also has no authority to permit or prohibit a specific country from collecting transit fees. Therefore, at present, the possibility that the Strait of Hormuz may not open cannot be ruled out.

On August 7, Saudi Arabia, Turkey, and Pakistan signed a joint defense agreement. This news was not widely covered by domestic media because it was not a direct issue between Iran and the U.S. These three countries share the commonality of being Sunni Islamic states, and this agreement was not hastily made due to a war with Iran but had been under discussion for some time.

If Turkey intervenes in a conflict with Iran, leading to situations like missile exchanges, there is a high probability that the entire Middle East could escalate into a war zone. In this scenario, oil production and supply in the Middle East could be completely halted. Since Turkey is also a member of the European Union (EU), Turkey's involvement could raise complex questions about how the EU would intervene in the Middle East conflict.

Even if Iran were to attack Saudi Arabia, it is unlikely that Pakistan would immediately retaliate with nuclear missiles against Iran. Currently, we do not know the details of the joint defense agreement, and Iran likely does not know its specifics either. Therefore, Iran would be forced to be quite cautious when attacking Saudi Arabia.

Iran will open the Strait of Hormuz but will seek to charge a transit fee, and DeFi Farmer Cho Seon-saeng predicts that the U.S. will not be able to reduce this fee rate. The U.S. will strongly oppose Iran's transit fee demand, stating, 'What nonsense are you talking about?' In response, Iran is expected to maintain its firm stance of not opening the Strait of Hormuz.

Recent drops in oil prices have positively impacted the U.S. economy, leading to a stock market boom with the Nasdaq rising 6% and Nvidia 12%. Notably, long-term U.S. Treasury yields fell significantly; according to the Treasury's QRA (Quarterly Refunding Announcement) data, Treasury Secretary Yellen conveyed a message emphasizing efforts to lower 10-year and 30-year Treasury yields before the November midterm elections, indicating a very sensitive interest rate situation.

In this context, Iran is analyzed to attempt to raise oil prices to pressure U.S. long-term Treasury yields, thereby increasing its negotiation leverage. Rising oil prices increase inflationary pressure, raising the likelihood of benchmark interest rate hikes, which can drive up U.S. long-term Treasury yields. Therefore, Iran appears to be using rising oil prices as a means of pressure against the U.S.

Non-farm employment figures are announced over three months, and recently, the July non-farm employment, initially expected to increase by 80,000, was revised down to -23,000. This is just the first month's record, and May and June's non-farm employment figures were also significantly revised. May's employment, originally announced as a 129,000 increase, was ultimately halved to 63,000, and June's employment was also drastically revised downwards from 57,000 to 20,000.

If this trend continues, the June figure could turn negative when the August non-farm employment is announced. The continuous downward revision of previous figures suggests that the U.S. job market is contracting much more severely than expected.

This weakening of the job market can be interpreted as an indicator of a general slowdown in the U.S. economy and can significantly influence the Federal Reserve's monetary policy decisions. A tight job market intensifies concerns about a recession, which could increase expectations for the end of the interest rate hike cycle or even interest rate cuts. Therefore, continuous downward revisions of past employment figures serve as important clues for future economic forecasts and monetary policy directions.

The probability of the U.S. Federal Reserve (Fed) raising interest rates in September has significantly decreased, with a freeze now highly predicted. Although an interest rate hike in September was initially considered likely, the outlook for a freeze has become dominant after recent economic data releases. Furthermore, the timing of the second interest rate hike has also been pushed back from March to June, suggesting a general slowdown in the pace of interest rate increases.

If Republicans initiate the cloture procedure for the Clarity Act faster than expected, this could be a major factor in Bitcoin's price increase. Additionally, if the upcoming Consumer Price Index (CPI) continues its trend of falling below last month's expectations, it could make an October rate hike ambiguous, further positively impacting Bitcoin's price. These factors have the potential to improve investment sentiment towards Bitcoin and drive price increases.

The current stablecoin market capitalization is approximately $306 billion, a decrease of about $10 billion from this year's high of $315 billion. A decrease in market capitalization is interpreted as a negative signal for the market, and if it falls into the $200 billion range, there is a high probability of a Bitcoin price decline. Therefore, it is crucial for the Clarity Act to pass quickly so that the market capitalization of Bitcoin and stablecoins can show a strong upward trend again.

Furthermore, there is significant concern among U.S. stock investors about quantum computers, with many viewing them as a real negative factor. Quantum computers have the potential to undermine current cryptographic systems, which could have a long-term negative impact on the cryptocurrency market, including Bitcoin, if this problem is not resolved.

These factors could exert downward pressure on Bitcoin prices, so investors should pay attention to stablecoin market capitalization trends and technological developments related to quantum computers.

The U.S. government is currently issuing Treasury bonds due to its budget deficit, and according to Q&A data for Q3 and Q4, it is minimizing the issuance of long-term bonds and disproportionately increasing the issuance of short-term bonds. The issuance ratio is severely skewed, with over $400 billion of the approximately $700 billion in bond issuance consisting of short-term bonds. This means that entities are needed to purchase these bonds, and an increase in stablecoin market capitalization would allow stablecoin issuers to reliably purchase Treasury bonds, playing a crucial role in the U.S. government's fiscal management. Therefore, the role of stablecoins is highlighted as very important in the U.S. financial system.