As of mid-May 2026, the CLARITY Act promoted by the U.S. Senate Banking Committee is interpreted by the market as a potential milestone for the cryptocurrency regulatory framework, leading to the dominant narrative that "clear regulation equals long-term benefits." Santiment detected that the number of bullish comments about the total cryptocurrency market capitalization is about 1.55 times that of bearish comments, indicating an obviously optimistic sentiment, which contrasts sharply with the actual behavior of compliant onshore funds: as a representative of the regulated platforms in the U.S., the Coinbase Bitcoin premium index had maintained a positive premium for 19 consecutive days previously, but has now turned negative for 11 consecutive days, currently around -0.0545%, indicating that local compliant funds are more inclined to sell or withdraw. Meanwhile, across the Atlantic, the Abu Dhabi sovereign wealth fund Mubadala has opted to increase its Bitcoin exposure through ETFs like BlackRock's IBIT, which are constrained by securities regulatory frameworks, raising its position size to nearly $660 million, essentially betting on this regulatory inflection point in the most "institutional" way. At the same time, on-chain monitoring shows a giant whale using 25x leverage to short approximately 23,151 ETH (about $50.55 million) while simultaneously going long approximately 323.72 BTC (about $25.27 million) with 20x leverage, thereby creating a hedge structure of short ETH and long BTC; analyst Ali notes that Bitcoin traders currently have an average realized profit margin of about 17%, approaching the levels seen around the peak in March 2022. Expectations around legislation, sovereign and institutional investments through ETFs, U.S. compliant fund premiums turning negative, as well as high leverage hedging and "overheating" warnings are intertwined within the same time window, pushing the Bitcoin market sentiment under the CLARITY Act towards a regulatory optimism while presenting a divergence of risks at a compliance tipping point.

CLARITY Act: A Regulatory Gamble Amidst High Spirits

Under the promotion of the U.S. Senate Banking Committee, the CLARITY Act is packaged as a "pass" that could reshape the cryptocurrency regulatory landscape, and market institutions have naturally elevated it to the level of a "potential milestone." The issue is that public information has not provided the probability of this legislation passing or a specific timeline, and the details of the provisions remain far from clear, yet many traders have already discounted it as a certain regulatory benefit into the prices. Santiment’s data captures this sentiment on-chain: the number of bullish comments surrounding the total cryptocurrency market capitalization is approximately 1.55 times that of bearish comments, with a significant portion of the optimism stemming from imagination about the "regulatory triumph" that the CLARITY Act would bring, rather than a calm reading of the actual rules text.

However, historical samples suggest a different script. Santiment points out that when sentiment indicators are clearly leaning bullish, the market often chooses to move in the opposite direction — not that regulatory benefits won't materialize, but rather that price movements are rarely guided by the simple logic of "legislative expectations → linear surge." Regulatory negotiations may be delayed, the wording of provisions may be weakened or even reversed in negotiations, and what the market is betting on at this moment is more of an unfinished political and compliance game. Current sentiment around the CLARITY Act tends to view the indeterminate as determinate and sees complex paths as a straightforward one; what is truly being priced in may not be the certainty of regulation itself, but rather the collective misjudgment risk of investors on the uncertain compliance trajectory.

Coinbase Negative Premium: Who is Selling Bitcoin Compliantly?

Just as sentiment treats the CLARITY Act as "good news already realized," the negative premium index of Coinbase reported by Coinglass tells a completely opposite story. This index has been negative for 11 consecutive days, with the latest value around -0.0545%, indicating that near the date of May 17, 2026, the price of Bitcoin on the Coinbase USD market is slightly lower on average than on other exchanges. This metric essentially measures the price difference between Coinbase, a regulated platform, and overseas or non-U.S. markets. Given that the user base of Coinbase has a higher percentage of compliant institutions and domestic funds, the direction of the premium is often regarded as a barometer of "what U.S. compliant funds are doing."

In contrast to a previous period where the index maintained a positive premium for 19 consecutive days, attending to a phase where there was willingness among U.S. onshore buyers to "snipe" at compliance premiums; now the same set of funds, from being willing to buy at a premium, has turned to selling or reducing positions in a discount, carrying a significance that goes beyond mere short-term portfolio adjustments. The negative premium is interpreted as U.S. onshore compliant investors leveraging Coinbase to sell or at least actively reduce exposure, which stands in stark contrast to the optimistic sentiment surrounding the CLARITY Act, and the significantly higher number of bullish comments observed by Santiment. While sentiment is cheering for the regulatory tipping point, compliant capital has already informed the market with price differences: in a regulatory outlook that has not yet been written into the code, they are more concerned about locking in existing profits and re-pricing the short-term risks of policy enforcement than about continuing to pay for sentiment premiums.

Mubadala Bets on IBIT: Sovereign Fund Embraces ETF

In contrast to U.S. compliant funds subtly reducing positions on Coinbase through negative premiums, Abu Dhabi’s sovereign wealth fund Mubadala has opted to increase its investments during the same time window in the reverse direction. According to Cointelegraph, Mubadala has recently increased its holdings in BlackRock's IBIT spot Bitcoin ETF, with its holdings nearing $660 million. As a sovereign fund with long-term capital properties that must meet strict compliance investment requirements, it did not take the direct path of buying coins through exchanges but instead gained exposure by acquiring IBIT, which is listed in the U.S. and constrained by securities regulatory frameworks, delegating the regulatory clarity and asset custody responsibilities to the ETF issuer and the exchange system.

Thus, the role of IBIT is amplified: it is not just a product code, but also serves as a compliance isolation layer between sovereign funds and the Bitcoin world. For institutions like Mubadala, the ETF structure means they do not directly touch on-chain assets and do not have to bear operational risks such as address management and compliance controls, yet can secure a long-term allocation position in the context where the CLARITY Act is viewed as a potential regulatory milestone and the rules are gradually taking shape. This contrasts with retail investors in America expressing short-term concerns through the negative premium on Coinbase: one side features domestic compliant funds moderately exiting at high prices, while the other side sees sovereign funds with longer funding durations increasing their holdings within the regulatory framework through ETFs. This divergence suggests to the market that future price fluctuations may still be intense, but the major direction in the medium to long term will increasingly be driven by large institutional capital willing to penetrate regulatory cycles and accept risks through compliant tools.

25 Short ETH, 20 Long BTC: The Gray Area of Leveraged Whales

While sovereign funds are betting on Bitcoin through compliant ETFs, another funding chain watched by Lookonchain displays an entirely different temperament: one whale is employing a high dual leverage in the derivatives market — shorting about 23,151 ETH with 25x leverage, with a nominal value of about $50.55 million, liquidating at a price pinned near $2,288.33; simultaneously going long approximately 323.72 BTC with 20x leverage, with a nominal value of about $25.27 million, and liquidating around $70,325.36. Combined, this represents a typical inter-species hedging position: using short ETH positions to hedge systematic downside risks, while betting that BTC will outperform ETH, exhibiting a clear directional sentiment, and highlighting that during the uptick of sentiment around the CLARITY legislation, significant leveraged funds are more willing to seek price differences across derivative platforms with varying regulatory strengths.

The gray area of these positions lies in the fact that they are wedged between regulated exposures like ETFs and spot markets and high-leverage derivatives that attract less regulatory scrutiny: should an unexpected regulatory message arise, or slight adjustments in compliance paths result in severe price volatility, such concentrated 20-25x leveraged positions would rapidly reach liquidation thresholds, pushing the platform’s risk control and liquidation mechanisms to the limit. For derivative platforms attempting to operate within existing compliance boundaries, this not only serves as a stress test for their margin systems and risk control models but also checks whether they truly possess centralized clearing risk management capabilities. This type of high-leverage cross-species betting will continue to challenge various platforms' risk tolerance between new and old regulatory boundaries.

Overheating and the Compliance Tipping Point: The New Order of Bitcoin Remains Undetermined

At the same time when leveraged positions are pushed to the edge of liquidation, another set of on-chain data pointed out by Ali tags the current market situation more directly: the average realized profit margins for Bitcoin traders are around 17%, similar to levels observed around the peak in March 2022, which means that once sentiment reverses, profit-taking could happen collectively at any time. Unlike the previous occasion, this round of high profit margins is not occurring during a regulatory vacuum but under the regulatory expectations stemming from the U.S. Senate Banking Committee's promotion of the CLARITY Act: on one hand, a potentially milestone-compliant framework is brewing, and on the other, the Coinbase Bitcoin premium index has been negative for 11 consecutive days, indicating that U.S. onshore compliant funds are more inclined to sell or withdraw through regulated platforms; meanwhile, the Abu Dhabi sovereign wealth fund Mubadala has opted to stack Bitcoin exposure to nearly $660 million through ETFs regulated by securities. Regulatory expectations, the compliant selling pressure reflected by Coinbase's negative premium, and the sovereign funds entering through Mubadala via ETFs represent the core dislocation of the current market: while prices and sentiment are heating up amid on-chain profits and bullish public sentiment, the compliance paths are being differentiated and tested by different types of funds. It can be anticipated that the future order of the Bitcoin market will increasingly be shaped by these compliant products, the risk preferences of sovereign and institutional funds, and regulatory clarity. The current average profit margin of 17%, combined with the bullish sentiment observed by Santiment and high leverage hedging behaviors, embeds a significant risk in this transition phase towards a compliant order that cannot be ignored for the upcoming potential volatility.

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