Historical analysis of U.S. midterm elections indicates a divergent outlook for equities and cryptocurrency. Data from past elections where the incumbent president’s party lost control of both the House and Senate show that the S&P 500 tended to rise in the months following the vote, while Bitcoin experienced sharp declines.
Potential impact on the S&P 500
Since 1954, there have been seven midterm elections in which the president’s party lost both chambers of Congress. In six of those cases, the S&P 500 increased by an average of 2.1% in the month after the election. The index’s gains grew to 10.7% over the next three months, 17.5% after six months, and 15.5% after one year. The benchmark was higher at three, six, and twelve months in all seven instances.
Analysts suggest that the removal of political uncertainty may allow investors to price the new balance of power more clearly. Current prediction markets place the probability of a Democratic sweep at roughly 76%, with Democrats priced at about 94%–95% to win the House and 76% to take the Senate.
Implications for Bitcoin
Historical patterns for Bitcoin after similar midterm outcomes show significant short‑term declines. Following the 2014 midterms, Bitcoin fell more than 45% within 71 days. In 2018, the cryptocurrency dropped nearly 50% in 39 days, and after the 2022 election it declined around 25% within weeks.
Longer‑term data indicates that post‑election lows have often become the bottoms of broader bear markets. A year after the referenced elections, Bitcoin’s price was approximately 24%, 45%, and 92% higher, respectively, averaging a 12‑month gain of about 54% across the three periods.
Contextual factors
Recent events, such as the FTX collapse and Binance’s attempted rescue of the exchange, coincided with the 2022 election cycle, complicating attribution of Bitcoin’s price movements solely to political outcomes.
Overall, while historical evidence points to a potentially bullish environment for the S&P 500 after a midterm shift in congressional control, Bitcoin may face short‑term pressure, with the possibility of longer‑term recovery depending on broader market dynamics.
