Bitcoin’s Rally Forces $700M in Short Liquidations, Market Structure Bill Stalls, and Tether Freezes $182M in USDT

Takeaways

• Spot bitcoin ETFs recorded their largest daily inflows in over three months on Tuesday: The funds drew in roughly $753.7 million, led by Fidelity’s FBTC and Bitwise’s BITB. On Wednesday, the price of bitcoin surged past $97,000 after crypto bears were hit with approximately $700 million in short liquidations, potentially resetting investor expectations for the coming weeks. Increased optimism about the Federal Reserve cutting interest rates at least twice in 2026 and muted inflation may be powering the uptick.
• CLARITY Act stalls over stablecoin yield debate, other unresolved issues: The US Senate Banking Committee delayed a planned markup of the CLARITY Act on Thursday after industry participants raised concerns about a number of the proposed crypto market structure bill’s provisions. The CLARITY Act had recently faced scrutiny from the crypto lobby after banking interests fought to ban stablecoins from paying out yield, arguing it would hurt community banks.
• Ripple has won preliminary authorization from Luxembourg’s regulator for an electronic-money (EMI) license, having also received an EMI license in the UK: Luxembourg's preliminary approval is a key step in the firm’s plan to offer its services across Europe. If finalized, the license would allow Ripple to provide regulated payment services across EU member states via passporting.
• Trump family-backed World Liberty Financial has rolled out its DeFi lending protocol built on Arbitrum-based Dolomite: The announcement buoyed both the WLFI and DOLO tokens, with early markets showing fairly thin liquidity. The platform allows users to either lend or borrow WLF’s own USD1 stablecoin and post a variety of cryptocurrencies as collateral.
• Tether froze roughly $182 million in USDT across five different Tron addresses: The company said the action was taken at the request of law-enforcement and is one of the largest single-day freezes executed by the company.

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Spot Bitcoin ETFs Post Largest Daily Inflows In More Than Three Months

The funds drew in roughly $753.7 million, led by Fidelity’s FBTC with $351 million, Bitwise’s BITB with $159 million, and Blackrock’s IBIT adding $126 million. Spot ether ETFs recorded positive net inflows on the same day, taking in around $130 million.

Increased optimism surrounding rate cuts by the Federal Reserve and muted inflation may be powering the uptick, which in turn may be fuelling renewed institutional interest in these funds. Additionally, investors are becoming more bullish on the possibility the US passes the CLARITY Act, which would provide a broad regulatory framework for digital assets and potentially boost adoption.

The bitcoin price surge caused approximately $700 million in short liquidations and reset trader expectations for the coming weeks, with Gemini Predictions now posting a 85% chance the price of bitcoin is between $93,000 and $97,000 as of January 16.

CLARITY Act Stalls Over Stablecoin Yield, Other Issues

Coinbase CEO Brian Armstrong objected to the latest version on Wednesday, arguing it would essentially ban tokenized equities, give the government unlimited access to DeFi activities, provide unneeded oversight to the SEC, and essentially kill stablecoin rewards.

The CLARITY Act has recently faced scrutiny from the crypto lobby after banking interests fought to ban stablecoins from paying out yield, arguing it would hurt community banks. Lawmakers also apparently were unable to come to a consensus on how to set up an ethics framework to prevent politicians from financially benefitting from crypto trades.

As of Thursday, it was unclear when a markup might happen. The Senate Ag Committee is expected to release its own markup of the CLARITY Act before the end of the month, giving Congress a few weeks to hash out issues and potentially put it to a floor vote.

Ripple Receives Preliminary Luxembourg E-Money Authorization, Eyeing EU Expansion

If finalized, the license would allow Ripple to provide regulated payment services across EU member states via passporting. The firm also received approval for an EMI license in the UK on Friday last week, issued by the country’s own Financial Conduct Authority (FCA) regulator.

Luxembourg’s preliminary approval in particular is a victory for the firm’s planned EU expansion, as it also seeks licensing as a crypto-asset service provider (CASP) under the EU’s Crypto-Assets (MiCA) framework. These two permissions are essential for Ripple to operate compliant payment and custody flows across the jurisdiction.

World Liberty Financial Launches Lending Platform on Dolomite

The platform allows users to either lend or borrow WLF’s own USD1 stablecoin and post a variety of cryptocurrencies as collateral. Both the WLF and DOLO tokens saw gains as a result of the announcement on Monday.

Initial USD1 lending rates are reportedly around 0.83% for borrowers and roughly 0.08% for lenders, but are expected to change with volume. World Liberty launched the lending market as the first of several products planned to expand USD1's onchain utility, the supply of which recently surpassed $3.4 billion. The new platform will also make use of the company’s previously released USD1 Points Program, which incentivizes users for holding or using the stablecoin.

Tether Freezes $182 Million in USDT Across Five Tron Wallets

The freeze marked one of the larger single-day enforcement actions on the network. The company also reiterated its protocol of freezing addresses believed to be tied to illicit activity and addresses which violate sanctions.

The stablecoin giant reports blocking over $3 billion in USDT to aid authorities worldwide across thousands of wallets, and analytics show total value of USDT freezes since 2023 are roughly 30 times greater than that of USDC freezes. Stablecoins have become the primary medium for illicit crypto transactions, with some reports listing them as accounting for 84% of all illicit crypto transaction volume.

-Team Gemini