What If the Clarity Act Doesn't Pass This Year? Here Are 3 Ways to Bulletproof Your Crypto Portfolio.

The Senate has scheduled a cloture vote for the Clarity Act on Sept. 15. That vote will be a procedural test that determines whether the chamber will take up the bill for a final vote at all this year, and no matter what happens, the crypto market will react. If it's voted down or delayed, that would likely cause an immediate dip in crypto prices across the sector, if not a rout.

As of Sept. 4, prediction markets put the odds of the Clarity Act's passage before the end of the year at just 16%, so investors in that space should be preparing themselves and their portfolios for any eventualities. So without further ado, here are three ways to protect your crypto portfolio.

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1. Own Bitcoin now, and be ready to buy the dip

The Clarity Act is intended to codify the rules of competition for the crypto industry so that the crypto market can operate in a more orderly and lawful fashion moving forward. Many of the changes to the law that the bill would make are centered around how crypto can be used in capital raises by businesses, and the reporting and compliance obligations that crypto operators will have to regulatory authorities like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Despite being the capstone asset of the crypto sector, Bitcoin (CRYPTO: BTC) doesn't really have a dog in those fights. The legislation would settle which agency oversees which tokens, but no serious regulatory dispute treats Bitcoin as a security.

The coin's behavior in early August might be a hint of what could be coming if the Clarity Act doesn't pass. When the Senate confirmed that it was leaving town for its summer recess without taking up the bill, between Aug. 3 and Aug. 17, its price only fell 1%. Coins that were highly exposed to the potential effects of the legislation fell harder; XRP (CRYPTO: XRP) declined 8.5% in the same period, the worst decline of the majors.

Bitcoin would still be pulled down in a sectorwide sell-off: Research group Bernstein estimates that it would fall by somewhere between 10% to 25%, and that altcoins could fall by as much as 15% to 30%.

Such a dip would give investors an opportunity to buy Bitcoin at prices a bit cheaper than usual. Similarly, buying some more of it now, rather than buying altcoins, means putting your capital where it's the most likely to hold up and grow over time even if conditions get a bit harder.

2. Keep some extra cash at the ready

Aside from being ready to buy some more Bitcoin, it's smart to have a bit of extra capital on hand to buy other major cryptos in case they get oversold amid the market's reaction to the Clarity Act not passing.

The framework is that the coins that would gain most from the bill's passage will almost certainly experience the worst downturns if it doesn't. Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and XRP all exist in some of the legal gray zones that the bill was written to clarify.

Ethereum and Solana have catalysts and drivers of their growth that will keep operating whether or not the bill gets over the finish line in Congress.

Ethereum's Glamsterdam upgrade and Solana's Alpenglow upgrade are both scheduled to roll out before the end of 2026, and they'll meaningfully improve the capabilities of those networks. Furthermore, they have their own project ecosystems that will continue to generate value no matter what happens in Congress.

3. Write the plan down in advance, and factor in your own reactions

This event is worth planning for.

It's smart to make such plans well in advance of when you will need them. If there's a strong and sudden decline in your crypto portfolio, it could send your emotions haywire and cause you to make some suboptimal decisions which you later regret.

The most important element of the plan is to specify which assets you're interested in buying, and at what degree of discount from their current prices.

Try to have the cash you would deploy under such circumstances pre-positioned in the right accounts ahead of time, and appreciate that you don't need to be worried about having catlike reflexes to time your entry. The point here is to ready yourself to buy the assets you'd like to own today and hold for years. Any discounts the market yields from this event will probably stick around for a couple of weeks.

Watch the vote on Sept. 15. If the Clarity Act falls short of 60 votes in the Senate, it will be time to put your plan into action and start cruising for cheap coins.

Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.