There is a proverb in the former Soviet Union: "You may not be interested in politics, but politics is very interested in you." In the operation of the state machinery, politics will have a non-negligible impact on individuals, institutions, companies, and business operations. The crypto market is no exception.
The Bitcoin halving event that occurs every four years has minimal impact on the price of Bitcoin. So, will the US election have any impact on the crypto market? First, we might as well observe the impact of the general election on traditional financial markets.
The impact of the election on traditional financial markets
The U.S. presidential election still has a great impact on the short-term trend of U.S. stocks. Historically, there has been greater volatility in the months leading up to an election. Therefore, the market often chooses to wait and see, waiting for the results to be announced before making major decisions. It is worth mentioning that U.S. stocks tend to perform better in the year after an election.
Interestingly, the election also has a certain impact on the short-term trend of gold. Similar to the U.S. stock market, demand for gold as a hedge fund also increases during the election period, so it will continue to rise in the months before the election.
Although in the short term, the U.S. presidential election will have a significant impact on U.S. stocks, gold, etc., in the long term, it will have little impact on their price performance, and it will not cause any abnormalities in the financial market. Even in the short term, the election will have little impact on the trend of the U.S. dollar and the overall economy.
This is because mid- to long-term performance in financial markets is often affected by economic parameters such as inflation trends. Who is elected president is not a huge factor.
Currently, the crypto market, led by Bitcoin, has risen to several trillion dollars. It has moved from a so-called alternative asset into the mainstream and is no longer on the fringe. Bitcoin is also increasingly affected by overall economic factors, including market liquidity, interest rate cuts and interest rate increases by the Federal Reserve, and U.S. elections.
When the Federal Reserve cuts interest rates and global capital liquidity increases significantly, it is also the moment when the price of Bitcoin continues to rise. Overall economic liquidity still plays a decisive role in the crypto market.
In addition, in recent months, non-farm employment data and CPI data, which have important reference value for the Federal Reserve's decision to cut interest rates, often bring considerable fluctuations to the crypto market in the short term once they are released. Bitcoin is currently inextricably linked to the overall economic and financial market. The linkage is getting closer and closer.
As an investor in the crypto market, the influence of overall economic factors cannot be ignored.
Crypto businesses continue to donate
Over the years, crypto companies have continuously donated money to American politicians.
As early as May 2022, SBF had boasted that it would donate US$100 million to US$1 billion in the 2024 US election. Donations don’t even begin until 2024. As of mid-October of that year, Bloomberg data showed that crypto industry participants had donated $84.1 million to U.S. politicians, with approximately 84% of that amount coming from SBF and other FTX senior executives.
Recently, an email from Wall Street revealed that SBF’s family was suspected of illegally misappropriating more than $100 million in FTX client funds to influence the 2022 election, triggering multiple legal proceedings. The email detailed SBF’s father Joe Bankman’s involvement in formulating and Financial Strategies Related to Political Contributions.
After the FTX incident, political donations in the crypto industry dropped a lot, but when the time came to the 2024 election year, political donations began to increase again.
As of May this year, the crypto industry’s political donations for the 2024 U.S. elections have reached a record high of $94 million. Coinbase and Ripple Labs donated $20.5 million and $20 million, respectively.
The reasons why the crypto industry continues to contribute to the US election can be roughly divided into several categories. One is to influence the stance of presidential candidates and government officials on cryptocurrency through donations. After all, policy regulation has an important impact on the legality, tax system and industry development of cryptocurrency. The second is to protect one's own interests from being impacted by legislation and supervision. In addition, crypto companies also use donations to increase brand awareness, create good public relations, etc.
Galaxy Digital CEO Mike Novogratz has predicted that no matter who wins the 2024 presidential election, cryptocurrency in the United States will receive favorable regulation, and most American politicians tend to support innovation in the encryption industry.
If the impact of more donations is on policy regulators, how much impact will the election have on the cryptocurrency market?
In the long run, there will be little impact
The bull market period from 2016 to mid-2020 was governed by Republican Trump, and from 2020 to 2024 by Democratic Joe Biden. The crypto markets dominated by Bitcoin have experienced strong bull markets during their respective governing cycles.
If we count from the election period to September, the chart below shows that although the price of Bitcoin will fluctuate during the period, a certain rate of return will still be obtained. Among them, the earliest period of Trump administration had the highest market return.
The bull market cycle in 2017 and the unlimited QE started in 2020 due to the new crown epidemic have brought huge capital inflows to the crypto market.
Source: Motrixport Technologies
During the Trump administration, he mentioned Bitcoin as a cryptocurrency on Twitter, but did not recognize its value.
During the Biden administration, he continued to be tolerant of cryptocurrencies. After the FTX incident, the US SEC tightened its crackdown. However, overall, the United States is still in a leading position in technological innovation and capital inflows in the encryption industry.
The bull market cycle in 2021 and the US SEC's adoption of a Bitcoin spot ETF in early 2024 will also bring considerable activity to the crypto market. As of September 11, total net inflows into Bitcoin spot ETFs reached $17 billion.
Source: Foresight News
It can be seen that judging from the historical market performance of the past two cycles, whether the Republican or Democratic presidential candidates came to power, they did not affect the upward trend of the crypto market.
Although the factors affecting the election are limited, the key factors that really have a long-term impact on the encryption market are the technological development of the industry itself and the decision-making of the Federal Reserve meeting.
In the short term, the impact will be greater
Although in the long run, its election impact is not significant, in the short term, it shows a considerable impact.
On the morning of July 14, as candidate Trump was assassinated, Bitcoin rose 2% that day, breaking through the $60,000 mark, and rose again by 6% the next day, rising to around $65,000, and fluctuated upwards thereafter. .
On July 28, Trump attended the much-watched Bitcoin conference. Subsequently, the market paused and the negative effects emerged after all the good news. On July 29, after Bitcoin had just risen above $70,000, it began to decline, and even There was panic selling in early August.
On August 23, when independent presidential candidate Robert F. Kennedy Jr. suspended his campaign and endorsed Trump, Bitcoin soared from $60,000 to nearly $65,000, a one-day increase of more than 6%.
Source: Foresight News
In the recent US presidential candidate debates, because neither Harris nor Trump mentioned cryptocurrency, the market response was generally lukewarm.
U.S. Presidential Election Day usually falls on the first Tuesday of November every four years. This day is called "Election Day". Therefore, the next important time point is November 5th. At that time, Bitcoin may fluctuate violently after the election results.
Judging from past cycles, when the U.S. SEC’s strict enforcement has negative consequences and leads to a decline, it is often the short-term bottom range of the market. When the dust settled on the US president and everything was a foregone conclusion, the heavy wait-and-see funds in the crypto market changed their hesitant style and began to make bold bets.
US election pushes Polymarket to center stage
No one expected prediction markets to explode this year. As a betting platform, users can directly bet on their choices with cryptocurrency, and the content covers everything from sports, culture, economy, cryptocurrency, election results, etc.
What really made Polymarket popular was the most popular presidential election event in the United States this year. Trump’s winning rate after his assassination, Biden’s withdrawal rate, and Harris Harris’s winning rate have caused fluctuations in the data amid constant statements and debates.
According to data from Dune, Polymarket’s transaction volume reached US$472 million in August, setting a record high and growing by more than 20% month-on-month. In addition, its monthly active users exceeded 63,000, a record high, with a month-on-month growth of over 42%. In August, the number of new users reached 71,000, also a record high.
Behind the three data hitting record highs, Polymarket has received widespread attention from the market. At present, its election prediction data is often quoted and reported by Bloomberg, CNBC, etc., attracting widespread attention outside the industry.
Source: Foresight News
The founder of 1confirmation once wrote that the truth of the market is hard to find, and it is very meaningful for Polymarket to show the true views of the market through real money betting. The market also seems to be increasingly recognizing that after the November election, news, culture, sports and other markets will become more popular tracks, and Polymarket is very suitable for any place where there is disagreement.
Polymarkket benefited from the US election event to create an out-of-circuit effect, and it can be regarded as one of the more successful models among crypto products.
summary
All in all, the U.S. election will have a certain impact on the supervision and policies of the encryption industry, but it will not cause major changes. The general election will also have a certain boosting effect on some product protocols such as Polymarket. In terms of market conditions, the long-term impact is not significant, but at important time points, it will still bring short-term large fluctuations to the market.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: 1912212.eth, Foresight News
