Alpha Recap 38: Clarity Act Fails, Rates Rise and KIP-5

The Alpha Recap aims to bring you the most important Alphas from the crypto market this week. Every Friday, we offer a digest of the most valuable information from our Alpha Feed.

Reserved for OAK Premium members, the Alpha Feed brings together insights, yield and airdrop strategies, as well as key market information. In other words, what makes up OAK Research's DNA: providing you with filtered content that goes beyond the market's noise.

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Clarity Act Buried, SEC and CFTC Still Try to Pave the Way for Tokenized Stocks

The Senate finally buried the Clarity Act on Tuesday by a single vote, 49 in favor to 50 against. In practice, and as expected, the main sticking point was the provisions on crypto holdings by elected officials, judged to be far too lenient. With the midterm elections only a few months away, the bill now looks doomed.

The good news is that the two main US regulators did not wait for the outcome of the vote to push ahead with their own agenda. The SEC published its Innovation Exemption on Thursday, nearly a year in the making, a temporary five-year framework allowing certain tokenized equity platforms to avoid exchange status, while their liquidity providers can, in parallel, be exempted from dealer status.

The CFTC opted for a more flexible approach with a no-action letter exempting wallets and "passive" interfaces from registering as introducing brokers. In short, the status granted to Phantom last March is being extended to other wallets offering regulated derivatives products.

On paper, these two decisions are of course welcome signs of openness following the failure of the Clarity Act. Their immediate reach, however, strikes us as far more limited than it appears. In practice, virtually all tokenized equities currently traded on-chain still sit outside the framework defined by the SEC. That said, some protocols could come out ahead.

→ Our Alpha breaks down the conditions imposed by the Innovation Exemption and why they mechanically exclude most current players. We also analyze what the CFTC letter actually changes and why certain protocols could benefit from this new framework.

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The Fed Raises Rates for the First Time Since 2023 and Embraces "Higher for Longer"

The Fed raised its policy rate by 25 basis points, bringing the target range to 3.75-4.00%, in a unanimous 12-0 vote. With the decision widely anticipated by markets, the announcement triggered only a limited reaction.

The real shift came from the markedly more hawkish tone struck by Kevin Warsh, in particular through his line that "inflation is a choice." The dot plot extends that message, now pointing to another hike in 2026, followed by rates held steady through 2028. The Fed appears to be embracing a "higher for longer" strategy far more openly, where some were still hoping for faster easing.

The decision nonetheless raises a deeper question, since it comes in a context where inflation is largely driven by a supply shock. The war in the Middle East has pushed oil prices higher, even though the tool the Fed is using, a rate hike, is designed above all to curb demand.

Ultimately, Kevin Warsh is trying to prevent this energy shock from spreading to the rest of the economy through wages and prices. The problem is that no data yet establishes that such a spillover poses a genuine near-term threat.

→ In our dedicated Alpha, we lay out why this unanimous vote can be read as a political message aimed at Trump ahead of the midterms, what the Fed was really trying to achieve in the bond market, and our take on Bitcoin's resilience in this new environment.

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Kinetiq Unveils KIP-5 and Deepens Its Alignment With Hyperliquid

This week, Kinetiq announced KIP-5, a proposal to redirect all KNTQ bought back by the protocol to Hyperliquid's Assistance Fund. Until now, those buybacks, amounting to 5.24 million tokens for roughly $821,000, were used to fund the yield distributed to holders of sKNTQ, the staked version of the token. In concrete terms, the decision puts an end to the sKNTQ yield vertical, even though its APY had been above 12% for several weeks.

From now on, a significant share of the KNTQ bought back will be permanently removed from circulation by being sent to the Assistance Fund, in keeping with the close alignment Kinetiq has maintained with Hyperliquid since day one. For sKNTQ holders, however, the trade-off is direct, since the token loses its main appeal at the very moment its Markets-linked vertical is struggling to find its footing.

The timing of the announcement is also worth noting. It comes just days before the final kPoints snapshot, scheduled for September 29, which suggests this pivot toward burning is not merely a technical reorganization but rather a strategic shift.

→ Our Alpha on Kinetiq details what sKNTQ actually becomes once stripped of its yield, how the difficulties facing Markets and kmHYPE help explain this decision, and how far this choice fits into the perspective of the upcoming Elysium Layer 2 launch.

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