With “AI regulatory capture” dominating the headlines and discourse online, a smaller but still important story is the failure of the Clarity Act gain the necessary 60 Senate votes to pass to the next stage, effectively killing it:
Washington — The Senate on Tuesday failed to advance a sweeping cryptocurrency bill known as the Clarity Act, amid opposition from Democrats and a handful of Republicans.
In a 49 to 50 vote, the measure fell short of the 60 votes needed to move forward, with all Democrats and four Republicans opposing.
Recall, the big concern in 2024-2025 was that crypto interests has “captured” the presidency, or that Trump had “sold out” to crypto donors; instead, the opposite happened. I was right again that crypto donors still have nothing to show for their support in 2024: no Bitcoin reserve, no Clarity Act, no direct investment of crypto assets or stocks, and no shout-outs on Twitter from Trump imploring people to buy crypto or endorsing Bitcoin. Just the same same radio silence as the past 15 months.
Crypto donors couldn’t even get the Clarity Act through, which last year was assumed to be an easy win, is now dead, undone by Trump’s profiteering, which had made the issue radioactive. So in other words, donors funded the destruction of the very legislation they sought: an own-goal. From my post, “The crypto industry lost:”
The CLARITY Act was the crypto industry’s top legislative priority for over a year, but Polymarket now puts the odds of its 2026 passage at only 27-31%, down from a peak of 82% back in February 2026. The CLARITY Act didn’t die because lobbying failed. It died because Trump himself has pulled in over $2 billion from “shitcoins” and crypto deals, which made the whole thing politically radioactive. Democrats turned his personal profiteering into the wedge issue that killed the bill his own donors paid for.
Now make that 6% according to Polymarket. Meanwhile, I continue to profit by shorting Bitcoin. Here is what I said last week:
Today, gold and bonds both fell on inflation concerns due to oil and Iran. Bitcoin fell as well, so by shorting that, the hedge worked. At some point in the short-term future, the market will ignore Iran and oil, similar to earlier this year. QQQ will make new highs, but Bitcoin will keep falling or otherwise lag. I make money form the delta.
This is already happening with the failure of the Clarity Act. I just had to be patient for Bitcoin to resume its fall, which it has.
Fears of AI bubble/over-regulation, China, inflation, deflation, interest rate hikes, Iran, oil shock–anything–is bearish for Bitcoins, hence making it the perfect hedge by shorting it. This was my idea originally. No one else had thought of it. This also ties into the capital allocation thesis:
I have long maintained that economics, finance, and human behavior are much more predictable than commonly assumed. Capital follows power, and power influences how capital is allocated–a feedback loop or vicious circle. Capital allocates itself along a gradient to maximize its return. This is true regardless of how powerful AI becomes–it’s an invariant quality. We see this with how Washington is centered around “big tech” and AI, or how those influence policy at the highest levels, in agreement with this thesis.
Capital flows are predictable: No matter how powerful AI becomes or how many math problems it solves, capital must still allocate itself optimally. Human behavior is also quite predictable in this respect (in addition to “power dynamics”). No one, whether humans or agents, knowingly enters into subpar investments when better ones are available. The only way this could fail is if we enter a post-capital era, but I don’t see this happening. Capital will always remain scarce and hence must be allocated optimally.