Election day has arrived. This is what it means for Crypto

The United States is voting in a crucial midterm election, and crypto fans are keeping a close eye on it.

Decision 2022

Americans went to the polls today for a crucial midterm election.

The House of Representatives, a third of the Senate, 31 gubernatorial seats and countless state and local offices are up for grabs today. The results will likely have a significant impact on the direction of crypto regulation and countless other decisions that could also impact the crypto markets.

The 2022 midterm elections are expected to have an outsized impact on the American political landscape compared to previous midterm elections. Amid rising inflation, the ever-present fear of recession, concerns about electoral integrity, and deep divisions over identity politics and key social issues, an intensely divided population is vying for crucial instruments of power at all levels of government.

Crypto concerns

While US crypto enthusiasts generally resist traditional party distinctions, there is some consensus that a Republican Congress may be more optimistic for the industry than continued Democratic control in the House of Representatives (the Senate in practice always requires a 60% approval vote to to surpass the majority). threat of filibuster, and is effectively at an impasse until one party can break that number of seats).

Democrats tend to be more publicly critical of cryptocurrencies and digital assets more broadly. Senator and 2020 presidential candidate Elizabeth Warren (D-MA) is among the party’s most notorious crypto critics, once comparing the technology to “snake oil” in 2021. Perhaps the only other Democrat in Congress whose distaste for crypto assets surpasses Warren’s is Rep. Brad Sherman (D-CA), who once called for an outright ban on cryptocurrency before conceding this fall that that ship had sailed.

Nevertheless, some Democrats are in favor of promoting favorable crypto regulation and have made efforts to work with Republican crypto proponents, who tend to outnumber Democratic proponents. The most notable of these is a piece of bipartisan legislation put forward by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY).

Anticipating market movements

Markets have historically recovered after midterm elections. According to data collected by Capital Group, RIMES and Standard and Poor’s, the S&P500 has averaged a 6% gain between September and December in election years since 1931.

However, this year it could be different. Markets don’t like uncertainty, and there are substantial reasons to expect confusion and misinformation to spread on social media as polls close. Moreover, an unprecedented number election deniers are currently running for office at any level of government; some have even indicated that they do may refuse to accept the results if they don’t win.

Therefore, it would not be surprising to see confusion and disagreement in the coming days over who will control the next Congress, and the markets – including crypto – are unlikely to respond well to that.

Nevertheless, it is widely believed that a clear Republican victory could be more positive for the crypto space, at least in the short term. Prominent Republican Senators like Pat Toomey (R-Pa.) and Lummis have shown a strong interest in supporting Bitcoin, and while there are also pro-Bitcoin Democratic senators, the Republicans have recently been recognized as the more crypto-friendly party.

Additionally, many crypto enthusiasts argue that the Biden administration has been a negative force in the crypto space over the past year. In March, President Biden signed an agreement Executive order on “Ensuring Responsible Development of Digital Assets,” calls for more supervision of the sector; the White House published its first crypto regulation framework report in September. During Biden’s term, a number of strict regulatory actions have been taken against a previously free sector, including the Treasury Department sector. sanctioning of Tornado Cashthe CFTCs lawsuit against Ooki DAOand the SEC’s increasing willingness to do so declare tokens securities.

Moreover, inflation has soared under the Biden administration as the Federal Reserve struggles to combat the worst effects of quantitative easing during the COVID-19 pandemic. It is widely argued that the excessive injection of cash into the economy from emergency spending is the main culprit, prompting the Fed to aggressively raise rates this year.

However, this has created its own problems as it has inevitably resulted in contractions in markets everywhere. With the macroeconomic environment still looking weak and a possible recession looming, many investors are pinning their hopes on a change in government that will turn the market.

What to pay attention to

Election Day 2022 could also go down in the crypto history books for other reasons.

The entire market was shocked today by the news that FTX.com would be acquired by Binance after days of speculation about liquidity problems. FTX’s native token, FTT, has collapsed, and there appears to be an unknown level of contagion creeping through the markets at the moment. Bitcoin hit new yearly lows today, briefly moving $17,579. Ethereum also suffered, falling 14% on the day to $1,329.

Therefore, it seems unlikely that anything that happens in the next 24 hours will miraculously change the market. But that doesn’t change the fact that the next Congress will be crucial in determining the long-term future of the industry, and it could take any of the most divergent directions.

Results are not expected until late tonight at the earliest; However, some vote counts may take several days to be certified. Because social media can be rife with misinformation, readers are encouraged to confirm results circulating on such platforms by contacting multiple reputable sources before accepting potential misinformation.

Disclosure: At the time of writing, the authors of this piece owned BTC, ETH, and several other crypto assets.