The midterm elections are approaching in the United States. Historically, this is a more volatile period, which could affect the price of Bitcoin (BTC). What can we expect?
The Impact of Midterms on Financial Markets
Held halfway through the U.S. president’s term, the midterms determine the composition of the House of Representatives and a portion of the Senate. This is a key issue at a time when President Donald Trump’s approval ratings have plummeted and the country is embroiled in a new war in the Middle East.
Historically, midterms lead to greater volatility in financial markets. The upcoming midterms, scheduled for this November, could therefore also shake up certain asset classes. According to a report by Binance Research, political uncertainty leads to average corrections of 16% in the S&P 500. For Bitcoin, this translates to an average decline of 52% one year after the midterms.
That said, once political uncertainty is resolved, the trend reverses. The price of the cryptocurrency (and S&P 500 stocks) tends to rise significantly one year after the midterm elections:
BTC performance one year before/after midterm elections
On average, the BTC price gains 54% in the year following the midterms. This data should be taken with a grain of salt, as Bitcoin has only experienced three midterm elections in its history.
Bitcoin Price Seeks Direction
The Bitcoin price experienced a sharp drop in early February. Since then, it has been trading within a range between $62,000 and $74,000, struggling to sustainably break through the psychological threshold of $70,000:
Bitcoin price has been trying to break out of its range since early February
According to TCN analyst Prof Chaîne, Bitcoin could, however, begin to see windows of opportunity:
The first signs of capitulation among long-term investors are beginning to appear. Historically, this type of behavior occurs during the advanced stages of bear markets and marks the gradual opening of accumulation windows. Patient investors could then benefit. Caution is advised, however, as the geopolitical situation is particularly volatile as spring approaches, so cryptocurrencies are not immune to further sharp declines.
