Bitcoin‘s price has shown recent strength, with the cryptocurrency rising roughly 20% over the past month and back near the $80,000 level. For the volatile digital asset class, sharp moves are nothing new and bitcoin’s performance in 2026 remains negative. It’s still down close to 10% this year.

The reasons for the recent rebound are multiple. In late August, the crypto market started moving past the latest “washout” that had occurred on August 19, one of the largest crypto liquidation events in recent history.

“We had some significant leverage,” said Michael Bucella, co-founder and managing partner of crypto investing firm Neoclassic Capital, on this week’s “ETF Edge.”

That pressured selling was followed by what Bucella describes as some “decent follow through on spot [market] and ETF buying.”

Flows into bitcoin ETFs have been on the rebound, with the iShares Bitcoin Trust (IBIT) taking in roughly $3.5 billion in net flows from investors in the past month, and close to getting back to even in flows for the year.

“That’s good to see, it’s healthy in terms of building out a base,” Bucella said of the recent buying.

“We’re still down on the year, and well off highs, but the next level to watch is $83,000 to $86,000. There’s a lot of long-term supply to chew through, but if we get past there, we’re in pretty good territory,” he added.

Bitcoin did pass the $81,000 in late August before giving back some of those gains.

Bitcoin remains in “a lot healthier position” than many other cryptocurrency assets, according to Bucella.

“The alt coin open interest and leverage is getting a little bit worrisome,” he said. “The overall leverage and open interest is about the same as before the October 2025 crash.”

On Oct. 10, 2025, $19 billion in crypto leverage was wiped out in a day.

Bucella said he doesn’t see a “flashing red light” that the market is heading into a collapse, “but you want to tread carefully and maybe incrementally accumulate your BTC and be a little more cautious as you go out the risk curve,” he added.

Zach Pandl, head of research at Grayscale Investments, said on “ETF Edge” that it is the “allocation” trade that is now taking place more regularly in the market among investment strategists and investors. With headlines like Treasury Secretary Scott Bessent’s effort (so far unsuccessful) to tame rising bond yields through more aggressive Treasury bond buybacks, and the dollar “debasement” trade, “investors are saying, How do I build a diversified portfolio? I have a lot of tech and AI, and crypto gives me unique exposure. That type of allocation trade is happening in the ETF structure,” Pandl said.

Crypto trade’s recent momentum and the political risks ahead

There are risks for bitcoin and the broader crypto market ahead. For one, the data remains far from conclusive that the trade has decoupled from tech for investors seeking a portfolio hedge, rather than remaining linked to risk-on investor momentum.

And then there are the political headlines.

A crucial Senate procedural vote on the Clarity Act, which seeks to establish a U.S. federal framework for digital assets, is coming up next week. Coinbase CEO Brian Armstrong, a major player in the effort to pass the legislation on Capitol Hill, told CNBC’s “Squawk Box Asia” this week that the legislation is likely to pass as crypto firms, law-enforcement groups and several banks reached consensus.

But he hedged his bets, adding, “Frankly, if it doesn’t pass, it’s also going to be a good outcome because the SEC and the CFTC have said that they’re ready to publish rulemaking, and we’re going to get regulatory clarity one way or another on the 15th or the day or two after,” he said.

The contentious crypto legislation which lawmakers have been trying and failing to pass all year remains far from a lock, according to prediction markets. And Armstrong’s view that one more political disappointment won’t change the equation drastically for crypto was a view also shared by Bucella and Pandl.

“The same two fundamental drivers have been pushing the asset class forward for a long time,” Pandl said on “ETF Edge.”

That is demand for scarcity assets, with the rising risks related to fiat currency being created by unchecked government debt growth. U.S. government debt crossed the $40 trillion mark last month, doubling in a decade.

“Investors are craving scarcity assets, whether physical gold or bitcoin,” Pandl said.

The other factor is more specific to the political outlook: enough regulatory clarity now exists for blockchain technology for crypto to continue to become integrated into mainstream finance. Despite the Clarity Act stall, “that has been moving ahead,” he said.

“The key regulators, the SEC and CFTC, have been bringing clarity to the industry,” Pandl said, adding that is not just for bitcoin but for smart contract assets including ethereum and solana, and perpetual futures like hyperliquid.

While the stablecoin industry received the legislative clarity it needed with the passage of the Genius Act over a year ago, recent steps from the CFTC to approve perpetual futures and the SEC laying out ground rules for transfer agents and crypto issuance, represent a “different path” but still a significant one for the industry to move ahead, Pandl said.

“Regulatory clarity, in general, is crucial,” Pandl said. “We don’t necessarily need the Clarity Act,” he added.

“I have said we would love to see the Clarity Act move forward,” Bucella said. “Unfortunately, I don’t see the likelihood we get the Clarity Act passed near term, and then we’re headed into midterms, and that could stall a number of things, including the Clarity Act, but generally, we are doing just fine in terms of education, regulation, and we will continue to get support from those open to dialogue with us,” he said.

“President Trump ran with a mandate to bring clarity to digital assets and I think the administration has been delivering on that,” Pandl said during the extended “ETF Edge” podcast. “Some was rescinding old rules that didn’t make sense; some bipartisan legislation like the Genius Act; and now we’re going through a different phase where regulators are tackling lots of rules and finding a way for blockchain tech to fit in. When was the last time we thought about transfer agents?” he said.

If the Democrats take the House, which is the expectation, the odds for any crypto-specific legislation may decline. Crypto has amassed bipartisan support in the past, and the industry has a recent history of donating to election campaigns across both parties. But powerful figures in the House and Senate like California Congresswoman Maxine Waters and Massachusetts Sen. Elizabeth Warren are noted crypto skeptics and are likely to hold key financial industry oversight committee positions.

There is also likely to be considerable focus from newly empowered Democrats on the Hill to highlight Trump’s crypto industry conflicts, according to Bloomberg.

Trump’s annual financial disclosure in June showed that Trump had made approximately $580 million in crypto gains. White House National Economic Council Director Kevin Hassett held between $1 million and $5 million worth of shares in crypto giant Coinbase at the end of 2025, as President Trump’s administration rewrote federal cryptocurrency policy, though both he and the White House told CNBC he has maintained a policy of recusing himself from all crypto-related matters.

On balance, a change in the power structure in D.C. may prove to be one more form of political gridlock, and as a result, better seen as a potential tailwind removed rather than a significant headwind added — or in other words, less a cause of significant crypto selling rather than the lack of a specific political catalyst for more gains. There will still be a Republican president, and SEC and CFTC leadership, pro-crypto in stance.

Pandl said the midterms, “will raise a lot of different issues” and it’s not just the outlook for the Clarity Act and continued appetite on Capitol Hill to engage with the crypto sector, but issues related to privacy in the AI era. That has brought digital assets like Zcash back into focus, and has led the asset’s price to outperform relative to other cryptos including bitcoin this year.

Privacy will be “a big one,” he said. “AI is amazing, but it’s raising a lot of privacy questions and we’re definitely being asked about Zcash and other privacy-preserving cryptos,” he said.

But Pandl thinks it is the investment case that will dominate the debate.

“The U.S. is in a dominant position with the dollar and it is ours to lose, and it is part of the bitcoin and crypto story. It’s a changed world driven by debt and deficits and foreign policy choices, and so one reason we look to digital assets is to express a view in a portfolio with an asset not tied to one country, one system, one set of rules … global in nature, and crypto is intriguing for that,” he said. “In my personal view, the dollar will lose some ground as a store of value and one of things that will pick up market share is digital assets,” he added.

The Treasury buybacks — $6 billion in buys was announced this week by Bessent, triple the normal level — are a signal to Pandl that policymakers “are treating the symptom because they can’t cure the disease.”

“The symptom is high interest rates but the underlying problem is structural deficits, and regardless of midterm outcomes, it’s not likely to deal with those challenges. We will have unchecked deficit growth and that drives investors to scarce assets like gold and bitcoin,” he said.

To hear more from these crypto investment industry executives on how they are positioned in the current market, watch this week’s full “ETF Edge” show above or listen to the podcast.

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