Will the Crypto Market Crash on 2024 US Election Day?

Last Updated on November 5, 2024 by SPN Editor

As the 2024 U.S. Presidential election looms, the crypto market is on edge, with significant events like the election and the Federal Open Market Committee (FOMC) interest rate cut decision scheduled this week. Market participants are gearing up for highly volatile trading, with experts referencing historical trends to support these expectations. Amidst this anticipation, there are concerns about a potential market crash on US Election Day.

This week, Bitfinex analysts shared their insights on the upcoming election in their Alpha Report, released on Monday. They noted that the prevailing market sentiment favors a Republican win as beneficial for risk assets, whereas a Democratic win is seen as less favorable. The analysts anticipate significant market volatility in the first 10 days of November, both leading up to and following the election. They highlighted the potential for either a sell-the-news event or a buying surge, which could result in substantial market movements.

A report by The Kobeissi Letter on the X platform also suggests that the financial market is poised for intense volatility, irrespective of who wins the election. Many crypto investors are adopting a wait-and-see approach, seeking more clarity on the market’s future trajectory.

Crypto in the US Election Spotlight

Cryptocurrency has emerged as a significant issue in the 2024 US Presidential Election. Donald Trump has actively supported Bitcoin and the broader crypto market, while Kamala Harris has shown strong interest in the technology sector. Historically, Bitcoin and other major altcoins have performed well after US presidential elections, leading to market expectations of a similar trend this year, potentially pushing Bitcoin to new all-time highs.

Impact of the US Election on the Crypto Market

The intertwining of the US political strategies with the cryptocurrency industry has grown stronger. Donald Trump’s endorsement of Bitcoin and the interest from various politicians in digital assets suggest the industry could see robust gains post-election. The US election outcome will also influence future crypto market regulations, with the US SEC and CFTC having different regulatory approaches. The crypto community has criticized the US SEC and its Chair Gary Gensler for regulatory overreach, and many investors are hopeful for a change in administration to foster innovation in the digital assets space.

Trump’s Influence

Former President Donald Trump has announced plans to fire Gary Gensler on his first day back in the White House, sparking optimism among crypto investors who view Gensler as an anti-crypto regulator. Trump’s pledge to make Bitcoin a strategic reserve for the US and his vocal support for the digital assets sector has bolstered investor confidence.

Stock Market and Crypto Market Correlation

The Kobeissi Letter’s analysis of historical stock market performance during election years reveals significant trends. Since 1920, 83% of election years saw positive returns leading up to Election Day, while only 67% had positive returns afterward. Stocks perform 4.2% better on average in the six months preceding an election compared to non-election years, but 1.4% worse in the six months following. Elevated volatility is expected regardless of the election outcome, with the VIX index up 65% year-to-date. As the crypto market often moves in tandem with stocks, investors are preparing for potential fluctuations.

What’s Next for Bitcoin and Altcoins?

Bitcoin is expected to experience volatile trading ahead of the election, with top altcoins likely to follow suit. Currently, BTC is trading near the $69K mark, having reached a high of $73,577.21 in the past week. A recent Matrixport report indicates that Bitcoin remains neutral as the election approaches, with its 21-day Relative Strength Index (RSI) at 56%, suggesting it is neither oversold nor overbought. Historically, Bitcoin has mirrored the S&P 500’s performance post-US presidential elections, experiencing significant gains in the year following the election.

While historical trends do not guarantee future results, they provide valuable insights. As the election unfolds, investors will be closely watching Bitcoin’s performance. The crypto market anticipates a strong rally regardless of the election outcome. Although the market may experience volatile trading or even a crash on US Election Day, it is expected to rebound quickly. Additionally, the US FOMC’s anticipated 25bps Fed rate cut this week is likely to boost market sentiment.