September 2026 Market Commentary

Tightening Policy, Failed Legislation, but a Resilient Bid for Crypto

September capped Q3 with a strong performance. BTC gained over 42% and ETH rallied over 70% over the quarter, as August reversed negative sentiments and September built on the August momentum.

Overall, in September, Brent crude oil rose 14.4% and the dollar strengthened as the U.S.-Iran conflict persisted, while gold fell 6.3% as higher real interest rates outweighed its war premium. Equities split as chipmakers and AI names lifted the Nasdaq 100 by 3.2%, but the S&P 500 slipped 0.4%. Crypto finished higher, with BTC up 6.05% and ETH up 8.4% over the month.

The energy supply shock reverberated through the first half of September. U.S. strikes on IRGC-linked Iranian tankers pushed Brent to about $97/barrel by Sept. 8, and the shutdown of Saudi Arabia’s East-West pipeline after drone attacks on Sept. 10-11 sent it to a settle above $108 by Sept. 15. Improving shipping flows through Hormuz and Iran diplomacy pulled crude lower in the back half of the month, but President Trump’s Sept. 26 rejection of Iran’s latest proposal firmed it again when markets reopened on Sept. 28.

On top of the oil spike, elevated PPI and CPI prints and an August payrolls report showing roughly triple the expected job gains pushed the Federal Reserve to hike interest rates on Sept. 16 for the first time since 2023. Long-maturity Treasury yields moved further than the policy rate: the 30-year yield reached its highest level since 2004, and the 10-year climbed to its highest in nearly two decades. A softer August core PCE print on Sept. 30 brought October hike odds down to around 35%, although markets still priced as many as four additional hikes over the coming year.

Stocks spent the first half of the month absorbing the oil shock, inflation, and a public push by frontier labs to slow down AI development. In the second half of the month, chipmakers led the Nasdaq 100 index to a record close as oil and long-dated yields eased and signs of continued AI spending reassured investors, before rising crude and long-end bond selling pulled the market back.

For crypto, Sept. 16 was the pivotal day. The Senate failed to advance the CLARITY Act one day before the Fed hiked, and BTC fell to $75,000 - $76,000 on $323 million of ETF outflows, below the $77,000 - $80,000 range it had held. However, a weekend short squeeze liquidated more than $700 million of bearish positions and lifted BTC above $85,000 for the first time since January. Then strong ETF inflows over the last two weeks carried BTC through a high near $87,000 not seen since January. BTC ended the month pressing against resistance near $85,000.

Product build-out in digital assets continued with Bitwise's Sept. 29 launch of NRR, the first U.S. spot NEAR ETP, which stakes its holdings in-house, through the company’s own validators. Security breaches remained the counterweight to sentiment: Liquid Network had 4,000 BTC stolen on Sept. 6 and the self-described “white hat” hackers only returned roughly 85%, and Bitget lost $351.6 million from its hot and warm wallets, a loss fully covered by its protection fund.

001 The Long-Awaited Settlement of CLARITY

This story by Alex Thorn originally appeared in Galaxy Research’s weekly newsletter.

On Sept. 15, the U.S. Senate failed to advance the CLARITY Act by a vote of 49-50, one day after Republicans released a new draft that offered substantial additional concessions. All Democrats voted against the bill, including previously staunch advocates Kirsten Gillibrand (D-NY), Ruben Gallego (D-AZ), and Angela Alsobrooks (D-MD). The vote required 60+ votes to enact cloture on the motion to proceed, which then would have allowed the Senate to formally “get on the bill” (take it up for debate).

Since the successful bipartisan markup in May, Galaxy had repeatedly cautioned the market that the odds of the bill were diminishing, cutting our odds as low as 10% after the chamber failed to vote on the bill before departing for August recess.

Of the failure of passing CLARITY at the Senate, longtime champion and bill sponsor Cynthia Lummis (R-WY) blamed Democrats, saying they “were never truly serious about protecting consumers and preserving American leadership.” Alsobrooks, who worked with Sen. Thom Tillis (R-NC) to find a compromise on the stablecoin rewards issue, pinned the failure on an inability to solve the ethics issue, saying that Democrats needed “very clear ethics in place to prevent the grift and the corruption that we have seen from this administration.”

Republican Senators Josh Hawley (R-MO) and Jerry Moran (R-KS) also voted against the bill, each citing the stablecoin yield issue. Democrat Chris Coons (D-NV) was not present for the vote. Tillis switched his vote to “No” at the last minute to enact a procedural maneuver that allows the cloture motion to be re-introduced during this Congress.

While the failure was not necessarily unexpected, it was certainly disappointing. Dozens and dozens of staffers, industry advocates, and administration officials had worked tirelessly for two years (and some even longer) on the landmark crypto market structure legislation, with countless changes and negotiations between stakeholders. The bill was substantially bipartisan and would have enhanced investor protections, provided new tools to combat illicit finance, and created clear rules of the road that would cement American leadership in capital markets for decades to come.

More than just the fact that the vote failed to reach the 60-vote threshold, the partisan nature and last-minute flame-out were saddening to see. We had word that last-minute negotiations were trending in the right direction, but that those talks were cut short and not allowed to proceed. Whatever happened at the last minute, it was enough to push all Democrats to vote no, even those who have been longtime advocates and who had worked tirelessly (and at some political cost) to find a middle ground.

Crypto will be fine without CLARITY, at least for the remainder of this administration. The market and banking regulators are being quite proactive and supportive of innovation. But of course, there are things that only Congress can do. While some action is possible in the next Congress, if Democrats take either or both chambers, the odds are relatively low that CLARITY will advance in the 120th Congress.

The focus now turns primarily to agency work, and there is a lot there to work on and for crypto to be excited about.

002 Rulemaking Without CLARITY

While it is disappointing that the CLARITY Act did not pass the Congress, agency work has been ramping up in the background. In the past two months, both the SEC and the CFTC have moved at an accelerated pace, proposing guidance for the crypto industry.

In August, we commented on the SEC’s proposed regulation of primary token issuance. The proposal would give crypto token creators a legal way to sell tokens to regular U.S. buyers without going through the full, costly registration process, and a clear way to stop their tokens from being treated as securities later.

In the seven weeks since, the SEC has further been focusing on removing the specific obstacles that keep securities from living onchain. Recent agency actions open the door for the usage of blockchains for recordkeeping by transfer agents, the building out of 24/7 trading venues, the integration of tokenized U.S.-listed stocks into DeFi environments to trade, and the custodying of cryptocurrencies by investment advisors.

Specifically, on Sept. 1, the SEC issued a proposal to allow transfer agents to recognize blockchain and distributed-ledger technology as expressly permitted recordkeeping media. This would, in our view, improve the overall efficiency of the financial system through common standards and platforms. The SEC’s proposal would close the distance between “our lawyers think this is permitted” and “the rulebook explicitly allows it.”

On Sept. 17, the SEC issued its long-awaited “innovation exemption,” allowing secondary trading of tokenized U.S. stocks on automated market makers and liquidity pools for five years without registering as national securities exchanges. Liquidity providers trading their own capital are also exempt from the “dealer” definition. Trading must run on allowlist, auditable infrastructure. Issuer-sponsored tokens are permitted, and third-party tokens qualify only if they carry the stock’s full legal, economic, and governance rights. It is a major step toward onchain capital markets. We commented on it here.

On Oct. 1, the SEC published a proposal that would permit an adviser to hold clients’ crypto itself if no permitted custodian is available with proper risk management practices. A regulated fund generally cannot hold an asset unless an approved custodian will safekeep it, and for many crypto assets none will. That practical gap is one of the main reasons the regulated money has stayed out.

Meanwhile, the CFTC has also been pushing to regulate the crypto spot market, and by Galaxy Research's count of enforcement and advisory actions, CFTC is now busier than the SEC.

In the first week of October, CFTC published Reg CTX and its companion Reg CAM in a 108-page advance notice of proposed rulemaking (ANPR). The ANPR finally offers crypto platforms a path to comply with the Dodd-Frank rule that leveraged retail commodity trades must occur on registered exchanges. Reg CAM would let a crypto market register as its own broker, clearinghouse, or both, an integrated structure that traditional futures markets keep separate.

The ANPR suggests “actual delivery” of a crypto trade may require possession of the private keys. We interpret this as meaning swaps of self-custodied assets need no registered intermediary. It also asks whether onchain lending vaults inside an exchange app count as leverage, and whether a regulated market may use a blockchain as its matching layer.

003 September ETF Flows Hold the August Reversal

June 2026 marked the weakest month of U.S. spot bitcoin ETF flows since the product launched in January 2024. Out of the 21 trading days, 18 days saw investors selling. The selling aggregated to $4.6 billion and pushed year-to-date flows into the red. This draining coincided with BTC’s price drop below $58,000.

In August, sentiment reversed and the ETF complex took in $3.46 billion, its strongest month since July 2025, with inflows on 19 of 21 trading days. September’s flows followed the momentum and added another $2.61 billion. From July to September, a total of $6.1 billion of capital flowed into these products as BTC’s price rallied by 47% from its June low.

Although September’s flow was bullish, the failure of the Senate cloture vote on the CLARITY Act mid-month did dampen sentiment. U.S. spot bitcoin ETFs experienced net outflows of $392 million the day CLARITY fizzled and $325 million the following day. However, sentiment quickly reversed beginning Sept. 17, as the funds posted nine consecutive sessions of net inflows, totaling $3.05 million. The streak included Sept. 21 and 22, which each brought in more than $1 billion and ranked as the largest single days of inflows since early 2025. Those two sessions pushed year-to-date flows in dollar terms back into positive territory, for the first time since late May.

With strong flows, BTC’s price recovered to $85,000 at the time of writing, up 47% from the June low and just 4.2% below the level at the start of the year. The rally of the past two months has come during a period of tightening Federal Reserve policy and sharply higher long-end Treasury yields. The 10-year yield has reached its highest level in nearly two decades, driven by inflation concerns. Rising real yields typically weigh on non-yielding assets, and bitcoin has historically traded as a high-beta risk asset during tightening cycles. The fact that ETF demand recovered under these conditions suggests that allocators are treating BTC’s recent weakness as an entry point rather than responding mainly to rate expectations.

004 Our Takeaways and Predictions

In October, the macro picture turns on whether core inflation is cooling or whether higher energy prices will feed through to the broader price level. The September CPI report, due this week, is expected to show another sizable rise in gasoline prices pushing up the headline number.

The Fed’s interest rate decision on Oct. 28 is another major event to watch. The market now is treating October as a pause with a 17% chance of a hike, and a benign core print would confirm that view and kick the proverbial can to December. A hot core reading would put October back into play.

Separately, U.S.-Iran diplomacy is unresolved, and the market is now dealing with it as a standing condition. Trump rejected Iran’s latest proposal and reportedly expects strikes to resume after the midterms, so we expect the war premium to persist through early November.

Overall, crypto appears set to trade in a relatively narrow range. Higher real yields weigh on the asset class, while technical crossover and steady corporate treasury buying support it. Meanwhile, regulatory progress is moving through the agencies. With that momentum, we could continue to see the convergence of TradFi and DeFi accelerate, building a bullish case for crypto’s adoption.

Key Events to Watch:

• October 15: Fed Governor Warsh Speaks

• October 29: COIN Q3 Earnings

• October 28: Fed Interest Rate Decision

• October 29: ECB Interest Rate Decision

• October 29: BoJ Interest Rate Decision

Key Macroeconomic Data Releases:

• October 15: PPI, Retail Sales

• October 23: Manufacturing PMI, Services PMI

• October 29: PCE, GDP

To learn more about the topics covered in this month's newsletter, contact our team or reach out to your Galaxy representative.

Crypto Performance & Volatility Data