A few hours before the presidential elections in the United States, the cryptocurrency market seems to be in turmoil. A few days ago (October 29), Bitcoin reached a peak at $73,600, touching its previous historical record ($73,794) by a few hundred dollars. In reality, it is normal that as such an important appointment approaches, sentiment will heat up, given the possible implications for digital assets and their diffusion in a key market such as the American one. An analysis of Adrian FritzHead of Research at 21Shares, explains how tomorrow’s US presidential elections could affect the cryptocurrency market.
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Bitcoin’s role as an apolitical asset
Bitcoin’s recent rally has been due in part to former President Donald Trump‘s chances of winningaccording to data released by platforms such as Polymarket and Kalshi. In fact, as stated in the report by Adrian Fritz (21Shares), although in recent weeks both candidates have expressed favorable positions towards cryptocurrencies, stressing above all the need for clear and precise regulation, Trump has repeatedly openly supported the sector even in past, something Kamala Harris never did. As an example, consider the proposal to establish digital asset reserves in the United States. It is therefore no coincidence that the price of Bitcoin has shown a strong correlation with Trump’s performance in the polls over the months, equal to 0.83 on Polymarket and 0.89 on Kalshi, as shown in the graph below (source : 21Shares).
For completeness, Fritz reminds that these are digitally native platforms, where a large investor could potentially single-handedly distort markets in both directions, directing both investors and voters towards the desired outcome. It should also be considered that this is only one model among many and that a comprehensive analysis should include a broader range of models and surveys to make informed investment decisions, also considering that others see Vice President Harris maintaining a certain edge.
However, the study continues, regardless of what the final result will be, we must never forget that Bitcoin is an apolitical asset, which has already experienced three electoral rounds, in 2012, 2016 and 2020, even if the first may be excluded from the analysis, given that at that time the capitalization of the digital currency was just $100 million. In 2016, together with the collapse of the Chinese stock market and the cut in crude oil production by OPEC, the US elections were the most important macroeconomic event of the year and the Democratic candidate, Hillary Clinton, looked like she was going to win with 71% of possibilities. In 2020, however, the odds of victory were closer, but Joe Biden still had the advantage. Yet, the average monthly return of Bitcoin was 7.83% in the first case and 8% in the second. Furthermore, Fritz recalls that 2020 was a year full of macro-events, one above all, the outbreak of the Covid-19 pandemic, which significantly reduced liquidity on global markets. This proves that Bitcoin is an asset that is only marginally affected by surveys on which candidate has the best chance of becoming president.
Bitcoin fundamentals remain solid
It is now clear that the price of Bitcoin it is positively correlated with government spending and global money supplywhich are expected to increase significantly regardless of the winner, given that the policies of both Trump and Harris are considered inflationary. At the same time, Fritz explains, after the German government and MT.GOX withdrew, much of the circulating supply was removed. This should further help push BTC demand higher.
Furthermore, both candidates have pledged to prioritize policies that promote financial inclusion and innovationestablishing clear and consistent regulatory frameworks for digital assets. This approach not only promotes individual opportunities, but also allows the United States to remain competitive in the global race for cryptocurrency adoption and innovation, bridging the gap that has been created with Europe, which, on this slowly, appears much more advanced today.
The risks of an uncertain outcome
The fact that Bitcoin is well positioned to continue to perform regardless of who will be the next occupant of the White House, it does not mean that these elections do not represent a risk and, according to Fritz, the main risk is that what happened in 2000 occurs, when a difference of just around 600 votes kept Florida in the balance between the candidates George W. Bush and Al Gore, which remained, as they say in jargon: “Too close to call” for 36 days.
In those circumstances, explains Fritz, the Nasdaq lost up to 26% of its value and very high volatility was generated. If such a scenario were to repeat itself this time, Bitcoin would experience the same volatility, given that a An uncertain election outcome would not only amplify price fluctuations in the short term, but could also dampen investor confidence, as prolonged ambiguity over policy direction could slow the adoption of clear regulatory frameworks for cryptocurrencies.
Beyond the presidential elections
Presidential elections often tend to focus all attention on the next president. However, we read in the analysis, voters will also be asked to decide on composition of the new House of Representatives and Senatefor which equally crucial battles are being fought for crypto. Two examples are Sherrod Brown versus Bernie Moreno in Ohio and Elizabeth Warren versus John Deaton in Massachusetts, with Brown and Warren often taking positions strongly against digital assets. Being extremely important on economic and fiscal issues, having a crypto-friendly Senate would represent a significant victory for the industry.
To date, Polymarket estimates a Republican control of this institution at 83% chance. The House of Representatives, explains the 21Shares report, is seen as a much closer race, with a probability of 53% for Republicans and 47% for Democrats. The House plays a crucial role in shaping cryptocurrency-specific tax legislation, and while crypto policy has received some bipartisan support, a shift in control could impact ministerial appointments and legislative priorities. Whether one party controls both houses and the presidency will be crucial in determining the level of government unity, which in turn will affect fiscal policy and broader financial markets. A divided government could slow the progress of cryptocurrency legislation, while a unified government could allow for more decisive action.
Ultimately, Fritz concludes, the results of this election will not only influence the price trajectory of Bitcoin, but above all They will also determine where the United States stands in the global race for digital asset adoption and innovation. With stakes this high, investors should prepare for potential market shifts by keeping an eye on how the broader political landscape develops in the days and weeks ahead.
