Crypto markets fell on Thursday as two forces weighed in at the same time: The Senate’s CLARITY Act revealed that the law may be lower than expected, while the Chinese AI model triggered a global financial meltdown and removed $1.8 trillion from the world’s stock markets.
Bitcoin fell to $63,367, down 1.78% in 24 hours, Ethereum fell to $1,830 and XRP fell to $1.08. The total value of the crypto market fell to $2.18 trillion as the Index of Fear and Greed held on the 31st.
CLARITY Act: One Yard Line, No Touchdown Yet
The House Financial Services Committee opened a hearing in New York to examine how the CLARITY Act could open up new opportunities for digital finance. The session was informational only with no votes, but it was one of the last steps to keep the bill from reaching a Senate vote.
Representative Timmons was impressed. “We’re on the same side of the circle, we’re just about to hit,” he said, describing the legislation as “critical to keeping the U.S. economy as the world’s financial center.”
The excitement was tempered by what was happening on Capitol Hill. The revised document has not yet been released following a Trump-Senate Republican meeting focused on ethics. Company leaders are secretly preparing for the deal to arrive next week, according to reporter Eleanor Terrett.
Polymarket odds for the CLARITY Act’s passage fell to 31%, even as Trump met with senators in what was said to be a last-ditch push to advance the bill before the August recess.
The AI Model That Moved Global Markets
The broad selloff came from an unexpected place. China’s Moonshot AI laboratory released Kimi K3, a 2.8 trillion open source model, the largest ever built, surpassing DeepSeek’s previous record of 1.6 trillion units. On independent benchmarks it performed close to Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6, putting its performance at a fraction of the cost.
The meaning was immediate. The AI market has been priced out of the assumption that staying competitive requires more, larger investments in chips and data centers. When a Chinese laboratory creates something that can be scaled down, the idea is criticized and the money allocated to AI products is changed at the same time.
Asian markets took the first hit. Japan’s Nikkei fell 4%. Taiwan’s Taiex fell 6.5% while TSMC fell 7.3%. The global semiconductor index fell 3%, entering bear market territory after losing more than 24% from its June peak. Global stocks have lost $2 trillion since June 22.
Worth Watching
Two catalysts will determine the next crypto move. The first is that the wording of the CLARITY Act comes out before the August recess. Definite delay clears one of the remaining remaining elements that is about to close. The second is whether the AI-driven equity selloff is sustained, given the crypto’s 80%-plus correlation with major indices.
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