Markets have already started to prepare for U.S. elections. The outcome of these elections may (or may not) have a material impact on financial market dynamics, including crypto. Does it really matter who wins, or would crypto be affected by stronger catalysts? Let’s take a closer look.
For obvious reasons, the data for crypto is not sufficient to evaluate how a Republican or a Democrat President impacts the market.
Fortunately, such data is available for traditional financial markets. For example, we can take a look at how markets performed starting with the presidency of Dwight Eisenhower (1953 - 1961). The shows that it is not possible to tell whether a Republican or a Democratic presidency is better for financial markets.
It should be noted that there is no sense in studying earlier market periods. The world we live in was shaped as a result of World War II, so the behavior of markets before this key event is hardly relevant for analysis.
Taking a look at a shorter time frame, Saxo analysts that a Democratic presidency was better for markets. However, they evaluated market history starting with the presidency of Bill Clinton (1993 - 2001), which increased the likelihood of random coincidence.
The general impact of a Democratic or Republican presidency is not the only catalyst that will matter for crypto markets. Regulation issues are extremely important. Traditionally, it is believed that a Trump administration would be more crypto-friendly compared to a Harris administration.
Such a conclusion is based on two key factors. First, Trump managed to portray himself as a crypto-friendly candidate during his presidential campaign. For example, Trump noted that he wanted the U.S. to be the leader in Bitcoin mining.
Second, the incoming president will likely change the head of the SEC. Under Gensler, the SEC took a hawkish stance on crypto. The regulator started numerous lawsuits, including several high-profile ones. In addition, the SEC views almost all crypto except Bitcoin as securities and insists that it should be regulated according to securities laws.
Analysts seem to be concluding that Gensler is the worst possible head of the SEC. According to this view, whoever comes to the SEC after a potential Trump victory would be better than Gensler.
This optimism may be founded on candidates’ campaign promises. However, history tells us that putting too much faith into promises made during an election campaign is a mistake in any country in the world.
Judging by the market perception of Trump, his victory could indeed provide support to crypto markets in the short term. In the long term, the beginning of the rate-cut cycle in major economies will likely serve as the main positive catalyst for crypto. Liquidity will be flowing to markets, providing long-term support to crypto projects.
Hopes for a sharp turn in regulatory attitude towards crypto may prove to be unfounded. Anyone who comes to the White House will focus on maintaining the global dominance of the U.S. dollar, while the U.S. role in financial innovation (such as crypto) will take a back seat.
