The CLARITY Act, a bill on digital-asset market structure (H.R. 3633), was intended to bring regulatory certainty.
In July 2025, the House passed its version 294–134. But as of February 2026, the Senate is gridlocked, with a bitter conflict pitting Wall Street banks against crypto firms. White House-brokered meetings (most recently February 10) have failed to bridge differences.
A Disruption Banking report on February 11 warned that Washington “promised certainty” but instead sparked a “public feud” over crypto regulation.
In precious metals, as Washington argues over stablecoin yields, another market is flashing a warning about what happens when liquidity vanishes: silver. This follows the Chinese Lunar New Year shutdown, which has triggered its own debate about thin order books and exaggerated price moves.
In both digital assets and metals, the message is similar: liquidity is fragile, and when it disappears, volatility fills the vacuum.
Silver’s Brutal Warning: 36% Intraday Plunge Shows What Thin Liquidity Really Does
While Washington debates stablecoin yields, silver traders just lived through what thin liquidity can do to a crowded trade.
In late January, silver surged into three-figure territory, briefly trading above $120 in what one market analyst, @CoinBureauFinance, described in their YouTube video as an “epic catch-up bid, fuelled in large part by retail mania.” But on January 30, the move reversed violently.
Silver “got steamrolled, dropping by over 30% intraday.” At one point, it was down as much as 36%, “One of its worst days ever.”
Why?
Silver is often described as “the more memeified metal. It’s smaller than gold. It moves faster, and retail traders love it. When it runs, it attracts momentum like a magnet.” But crowded longs “don’t unwind in an orderly fashion,” a CoinBureau analyst noted.
When volatility spiked, exchanges, including the CME, raised margin requirements. Traders suddenly needed more collateral. Those who couldn’t post it were forced to sell. Thin liquidity amplified the move.
It is precisely the dynamic banks warn about in stablecoins: rapid inflows during good times, disorderly exits when conditions change.
China’s Lunar New Year Blackout: 9 Days of Thin Books, Wide Spreads, and Crash Risk
Another stress test is unfolding this week. During China’s Lunar New Year shutdown (February 15–23), a major pillar of physical precious metals demand goes offline. China is one of the world’s largest precious metals miner, top consumer, and controls up to 50% of global refined silver output.
As another market analyst, @OGJohnAG2, warned, when China closes, “price discovery shifts to London and New York, but London and New York are primarily paper markets.” The result: thin order books and wide spreads.
In silver, bid-ask spreads that are normally 2–3 cents in ETFs like SLV can widen to 10–20 cents. In futures, small flows can create outsized moves. “Thin liquidity gets exploited,” the analyst cautioned.
Three scenarios were outlined for the nine-day blackout:
- Orderly consolidation (40% probability): Silver trades between $76 and $81. “Volume is light. Volatility is elevated but manageable.”
- Bullish breakout (30% probability): Silver reclaims $81 and pushes toward $84–$85, driven by physical buyers and rate-cut expectations.
- Flash crash redux (30% probability): A liquidity vacuum sends silver back toward $72–$74 or lower.
The advice was blunt:
“Don’t get cute. Don’t try to front-run the crash or front-run the squeeze. Nobody knows which scenario plays out. The edge is in survival, not prediction.”
For physical holders: “Do nothing. Let the volatility pass.” For futures traders: cut position sizes by 30%–50%, widen stops, and avoid overnight exposure unless you can stomach 5%–10% swings “on no news.”
In short: survive the liquidity drain, trade the other side when real price discovery returns.
White House Steps In: Mediation Fails, Polymarket Odds Slip, Midterms Loom
Back in Washington, with Congress stuck, the White House has taken center stage.
Executive Director, President’s Council of Advisors for Digital Assets, Patrick Witt has convened several closed-door summits. After the latest meeting on February 10 failed to produce a deal, the White House reportedly set a February 28 deadline to resolve the yield dispute.
Treasury Secretary Scott Bessent urged Congress to pass the bill “this spring” before midterm election politics derail the effort. Hewarned that the bipartisan coalition “may collapse” if Democrats retake the House in November.
Market odds have already shifted. Polymarket’s prediction contract shows about a 70% chance the CLARITY Act will be signed by the end of 2026.
“Probably not the message you want to be sending to the crypto community before midterms,” crypto adviser Patrick Witt warned on X, alluding to pressure on legislators.
The Bigger Picture: In Crypto and Metals, Liquidity Is Power
The CLARITY Act debate is framed as banks versus crypto. But beneath the rhetoric lies a deeper issue: liquidity and who controls it.
Silver’s 36% intraday collapse showed what happens when crowded trades meet margin hikes and thin order books. China’s nine-day shutdown underscores how quickly spreads can widen when a major participant steps away.
Stablecoins are different assets, but the structural tension is similar. Banks fear deposit flight and destabilizing yield competition. Crypto firms fear that banning rewards cements incumbents’ dominance.
In both markets, the lesson is the same: liquidity is power.
Whether lawmakers can bridge the stablecoin divide by month’s end remains to be seen. But as silver traders are being reminded this week, survival often matters more than prediction, especially when the market’s biggest player steps aside.
Author: Ayanfe Fakunle
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
CLARITY Act: Washington Promised Certainty, Crypto Got a Civil War | Disruption Banking
The Great Silver Crash 2026 and the Alleged Paper Reset | Disruption Banking
