Original title: "How will the US election, which everyone is talking about, affect the crypto market?"

Original author: 1912212.eth, Foresight News

There is a proverb in the former Soviet Union: "You may not be interested in politics, but politics is very interested in you." Politics will have an unignorable impact on individuals, institutions, companies, and business operations in the operation of the state machine. The crypto market is no exception.

The Bitcoin halving event, which happens every four years, has had a minimal impact on the BTC price. So does the US election have any impact on the crypto market? First of all, let's observe the impact of the election on the traditional financial market.

The impact of the election on the traditional financial market

The US presidential election still has a great impact on the short-term trend of US stocks. Historically, there have been large fluctuations in the months before the election. Therefore, the market often chooses to wait and see, and wait for the results to be announced before making major decisions. It is worth mentioning that US stocks often perform better one year after the election.

Interestingly, the election also has a certain impact on the short-term trend of gold. Similar to US stocks, gold, as a hedge fund, also has a higher demand during the election, so it will continue to rise in the months before the election.

Although in the short term, the US presidential election will have a significant impact on US stocks, gold, etc., in the long run, it has little impact on their price performance and has not caused any abnormalities in the financial market. Even in the short term, the election has little impact on the trend of the US dollar and the macro economy.

This is because the medium- and long-term performance in the financial market is often affected by economic parameters such as inflation trends. Who is elected president is not a big factor.

At present, the crypto market, led by Bitcoin, has risen to trillions of dollars. It has entered the mainstream vision from the so-called alternative assets and is no longer on the edge. Bitcoin is also increasingly affected by macro factors, including market liquidity, interest rate cuts and interest rate hikes by the Federal Reserve, and the US election.

When the Federal Reserve cuts interest rates and global capital liquidity increases significantly, it is also the time when BTC continues to rise in price. Macro liquidity still plays a decisive role in the crypto market.

In addition, in recent months, non-agricultural employment data and CPI data, which are of great reference value to the Federal Reserve's interest rate cut decision, often bring considerable fluctuations to the crypto market once they are released. BTC is currently increasingly linked to the macro financial market.

As an investor in the crypto market, the influence of macro factors cannot be ignored.

Crypto companies continue to donate

Over the years, crypto companies have continued to donate to American politicians.

As early as May 2022, SBF had vowed to donate $100 million to $1 billion in the 2024 US election. Even before 2024, he began to make large donations. As of mid-October of that year, data from Bloomberg showed that crypto industry participants donated $84.1 million to American politicians, of which about 84% came from SBF and other FTX executives.

Recently, an email from Wall Street revealed that SBF's family was suspected of illegally misappropriating more than $100 million of FTX customer funds to influence the 2022 election, which triggered multiple legal proceedings. The email detailed SBF's father Joe Bankman's participation in the formulation of financial strategies related to political donations.

After the FTX incident, political donations in the crypto industry decreased 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 US election have reached $94 million, a record high. Coinbase and Ripple Labs donated $20.5 million and $20 million, respectively.

The sources of the crypto industry's continuous donations to the US election can be roughly divided into several categories. First, through donations, they can influence the stance of presidential candidates and government officials on cryptocurrencies. After all, policy regulation has an important impact on the legitimacy of cryptocurrencies, tax systems, and industry development. Second, they can protect their own interests from being impacted by legislation and regulation. In addition, crypto companies also use donations to increase brand awareness and build good public relations.

Galaxy Digital CEO Mike Novogratz once predicted that no matter who wins the 2024 presidential election, cryptocurrencies in the United States will receive favorable regulation, and most American politicians tend to support innovation in the crypto industry.

If donations have more impact on the policy and regulatory level, how much impact will the election have on the cryptocurrency market?

In the long run, the impact is not significant

The bull market from 2016 to mid-2020 was under the rule of Republican Trump, and from 2020 to 2024, it was under the rule of Democratic Biden. The BTC-dominated crypto market has experienced strong bull markets during their respective cycles.

If we count from the election period to September, the following chart shows that although the BTC price will fluctuate, it still gets a certain return. Among them, the market return is the highest during the earliest Trump administration.

The bull market cycle in 2017 and the unlimited QE launched in 2020 due to the COVID-19 pandemic have brought huge capital inflows to the crypto market.

During Trump's administration, he mentioned Bitcoin as a cryptocurrency on Twitter, but did not recognize its value.

During Biden's administration, he continued to maintain a tolerant attitude towards cryptocurrencies. After the FTX incident, the US SEC's crackdown became stricter. However, overall, the United States is still in a leading position in technological innovation and capital inflows in the crypto field.

The bull market cycle in 2021 and the approval of the Bitcoin spot ETF by the US SEC in early 2024 also brought considerable activity to the crypto market. As of September 11, the total net inflow of BTC spot ETF reached 17 billion US dollars.

It can be seen that from the historical performance of the market in 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 election has limited factors, the key factors that really have a long-term impact on the crypto market are still the industry's own technological development, the Federal Reserve meeting decisions and other key factors.

In the short term, the impact is relatively large

Although in the long run, the impact of the election is not large, in the short term, it shows a considerable impact.

On the morning of July 14, Trump, as a candidate, was assassinated. On that day, BTC rose by 2%, breaking through the $60,000 mark, and rose by 6% again the next day, rising to around $65,000, and then fluctuated upward.

On July 28, Trump attended the highly anticipated Bitcoin conference. Subsequently, the market paused after the good news was exhausted, and the bad news appeared. On July 29, Bitcoin just rose above $70,000 and began to decline all the way, and even panic selling occurred in early August.

On August 23, when independent presidential candidate Robert Kennedy Jr. suspended his campaign and supported Trump, Bitcoin soared from $60,000 to around $65,000, a single-day increase of more than 6%.

In the recent debates between US presidential candidates, the market reaction was generally cold because neither Harris nor Trump mentioned cryptocurrencies.

The US presidential election day is usually the first Tuesday of November every four years. This day is called "Election Day". Therefore, the next very important time node is November 5. By then, BTC may experience drastic fluctuations after the election results come out.

From the past cycle, when the US SEC's strict law enforcement leads to a negative impact and a decline, it is often the short-term bottom range of the market. When the US presidential dust settled and everything was a foregone conclusion, the strong wait-and-see funds in the crypto market changed their hesitant style and began to bet boldly.

The US election pushed Polymarket to the center of the stage

No one expected the prediction market to be so popular this year. As a betting platform, users can directly use cryptocurrency to bet on their choices. As for the content, it covers everything, spanning sports, culture, economy, cryptocurrency, election results, etc.

What really made Polymarket popular was this year's hottest presidential election event in the United States. Trump's winning rate after the assassination, Biden's withdrawal rate, and Harris's winning rate after participating in the election have caused data changes and fluctuations in various statements and debates.

According to Dune data, Polymarket's trading volume in August reached US$472 million, a record high, an increase of more than 20% month-on-month. In addition, its monthly active users exceeded 63,000, a record high, an increase of more than 42% month-on-month. The number of new users in August reached 71,000, also a record high.

Behind the record highs of the three data, Polymarket has received widespread attention from the market. At present, its election prediction data is often cited by Bloomberg, CNBC and other media, attracting widespread attention outside the circle.

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 view of the market through real money betting. The market seems to be constantly 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 are differences.

Polymarkket benefited from the US election event to create an out-of-circle effect, which can be regarded as one of the more successful examples of encryption products.

Summary

In summary, the US election will have a certain impact on the regulation and policies of the crypto industry, but there will not be major changes. The 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 fluctuations to the market.

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