Ethereum drops 5% to test $1,800 as Clarity Act shelved

Ethereum fell 5% in seven days to test $1,800 support after the US Senate shelved the Clarity Act, cutting 2026 passage odds to 26% on Polymarket.

Trading volumes have dropped to their lowest since December 2023, according to Santiment data, with ETH's $6 billion in daily volume representing just 2.8 percent of circulating market cap.

FedWatch data shows a 63 percent probability of a 25 basis point rate hike in September, while ETH-linked ETFs broke a two-month outflow streak with $365 million in July inflows.

If $1,800 fails, the next demand zone sits at $1,500, where ETH bounced earlier this year. Bernstein analysts expect the crypto market to bottom late in the third quarter ahead of the mid-terms.

Volumes at Two-Year Lows as Fed Divergence Weighs

The Senate's decision to shelve the Clarity Act before its summer recess removes the regulatory clarity the market had been anticipating. Polymarket odds of passage in 2026 have fallen from a peak of 46 percent in late July to 26 percent, according to the prediction market.

Santiment data shows volumes at their lowest since December 2023. While ETH recovered from similar conditions back then, a buy signal had flashed as the seven-day moving average crossed above the 30-day average just before the rally. That signal has not yet appeared this time.

A disagreement among Federal Reserve officials at last month's meeting confirmed market expectations that a September hike could be implemented. FedWatch data puts the odds of a 25 basis point increase at 63 percent. Higher rates make low-risk assets more attractive relative to crypto, which carries no yield.

Weekly RSI Buy Signal Persists After $1,500 Bounce

The Relative Strength Index on the weekly chart has dropped to 30 twice this year, a level that has marked the end of previous bearish cycles over the past eight years. ETH recently bounced off a long-dated support at $1,500.

Based on how this signal has performed historically, strong gains could follow during the next bull market, with the potential to push Ethereum above $5,000 in the next 12 months.

"From a tactical standpoint, we expect the crypto market to bottom and start showing momentum towards late Q3 and early Q4 prior to the mid-terms," analysts from Bernstein said last week.

For now, $1,800 needs to hold to prevent a retest of the $1,500 demand zone. If that support holds, the current rally could still have enough momentum to continue.

This article is for informational purposes only and does not constitute investment advice.