Much of this week’s volatility has come from the same two forces that have been driving global markets for months: geopolitics and monetary policy. Crypto initially benefited from renewed hopes that tensions in the Persian Gulf could ease. On Tuesday, US Treasury Secretary Scott Bessent said an agreement allowing more shipping through the Strait of Hormuz could be reached within days, helping oil prices fall and improving demand for risk assets.
The optimism did not last. Iran has denied that direct negotiations with Washington are currently taking place, while talks with Oman have focused on a new framework for traffic through the strait. Tehran and Muscat have agreed on the geographical parameters of a possible route, but several important conditions remain unresolved. Iran is also considering restrictions on US-, Israeli- and other vessels it classifies as hostile, while shipping companies have warned that proposed transit fees and sanctions could make the emerging arrangement difficult to implement. In other words, a full reopening of Hormuz is still far from certain.
The next immediate test for crypto comes from the US labour market. July employment data are due at 8:30 a.m. ET, with economists surveyed by Reuters expecting nonfarm payrolls to rise by around 80,000 after June’s 57,000 increase. The unemployment rate is forecast to remain at 4.2%.
A stronger-than-expected report could strengthen the argument for another Federal Reserve rate increase in September. Markets currently assign roughly a 55% probability to a 25-basis-point hike, although that pricing could change sharply after the jobs release.
Recent comments from Fed officials have kept that risk alive. Kansas City Fed President Jeff Schmid has argued that monetary policy may need to become more restrictive because inflation remains too high, while St. Louis Fed President Alberto Musalem said the central bank should have raised rates by 25 basis points at its July meeting. Fed Governor Lisa Cook has taken a slightly more conditional position: she supported keeping rates unchanged but said she is prepared to act if disinflation fails to resume.
That increasingly hawkish debate matters for digital assets because higher rates generally strengthen the appeal of dollar-denominated instruments and make speculative assets less attractive. The same policy tension was already visible in an earlier FORECK.INFO crypto market outlook, when ETF demand was helping offset uncertainty surrounding the Fed and US regulation.
Washington has added another layer of uncertainty this week. Senate Majority Leader John Thune confirmed that the CLARITY Act will not receive a floor vote before lawmakers leave for the August recess. The legislation is expected to return to the agenda in September, but the delay leaves supporters with a narrower window before the midterm election calendar begins to dominate congressional business.
The bill is not dead, but several political issues remain unresolved. One of the most difficult is the proposed ethics framework covering senior government officials and their involvement in digital-asset businesses. Senate Republicans have already introduced crypto ethics restrictions, while Democrats continue to push for stronger conflict-of-interest provisions. The postponement therefore increases the risk of further delays even if Senate leadership continues to treat the legislation as a priority.
Security concerns have also returned to the spotlight after a serious vulnerability was discovered in certain Coldcard hardware wallets. Researchers traced the problem to flawed random-number generation used when some wallet recovery phrases were created, potentially making private keys predictable.
Galaxy Research said the first major attack wave on July 30 drained more than 1,000 BTC from 1,196 wallets in less than an hour. Two additional suspicious waves later pushed estimated losses to roughly $89 million. The incident is particularly notable because Coldcard is designed for offline Bitcoin storage, showing that keeping keys away from the internet does not eliminate risks created by faulty wallet software.
Despite those pressures, demand through regulated investment products has remained surprisingly resilient. Bitcoin ETFs recorded positive flows on every US trading day this week through Thursday, including $244.4 million on August 5, while Ethereum products ended the same four-session period with almost $200 million in net inflows. That institutional demand has so far helped prevent geopolitical and regulatory concerns from turning into a deeper market sell-off.
Sentiment nevertheless remains fragile. Alternative.me’s Crypto Fear & Greed Index is currently at 29, firmly inside the “Fear” zone. The reading suggests investors remain reluctant to treat the latest rebound as the beginning of a sustained bullish move.
For now, the crypto market is caught between two opposing forces. ETF inflows continue to provide structural support, while uncertainty surrounding US interest rates, the Strait of Hormuz, the CLARITY Act and wallet security is limiting risk appetite. The July employment report could determine which side dominates next: a softer reading would ease pressure from the Fed, while another sign of labour-market resilience could revive rate-hike expectations and keep Bitcoin and the broader market in consolidation.
