Bitcoin fell after each of the 2014, 2018 and 2022 US midterms, but the selloffs coincided with separate shocks to crypto markets and tightening financial conditions. The declines cited in the analysis were 48% over 71 days in 2014, 51% over 39 days in 2018 and 15% over 13 days in 2022. The argument is that the election dates did not cause the drops; they landed in already fragile market conditions.
Why it matters
In 2014, Bitcoin was already deep in a bear market after its December 2013 peak near $1,150 and the collapse of Mt. Gox. The Fed ended quantitative easing six days before the midterms. In January 2015, Bitstamp was hacked, losing about 19,000 BTC and halting withdrawals for five days. Bitcoin later bottomed near $170.
In 2018, prices were subdued around the election, then Bitcoin dropped 15% on November 14 amid the Bitcoin Cash hash war. The analysis also points to falling hash rate, pressure on ICO treasuries as the SEC cracked down, and Fed rate hikes. In 2022, the FTX collapse, subsequent withdrawal freezes at BlockFi and Genesis, and a 75-basis-point Fed hike coincided with Bitcoin's fall to about $15,500.
Market impact
The common thread is not a single repeated event, but crypto-specific stress hitting markets with limited liquidity. The analysis cautions that three different episodes are too small a sample to establish a reliable midterm pattern.
For the current cycle, it identifies tighter monetary conditions as a possible point of resemblance: rates were cited at 3.75% to 4%, September inflation at 3.7%, and Treasury yields above 5%. But it says no comparable forced seller has emerged; Bitcoin fell only about 5% to 6% after a Binance hack. The analysis highlights upcoming jobs and CPI reports as indicators relevant to the Fed's December rate decision, rather than election results.
Frequently asked questions
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What drove Bitcoin's 2014 decline around the midterms?
Bitcoin was already in a bear market after its 2013 peak and the Mt. Gox collapse. The Fed had ended quantitative easing, and Bitstamp was hacked in January 2015.
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What happened to Bitcoin after the 2018 midterm election?
Bitcoin showed little immediate reaction to the election, then fell 15% on November 14 during the Bitcoin Cash hash war. The analysis also cites SEC pressure on ICOs and Fed rate hikes.
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How did the 2022 FTX crisis overlap with Bitcoin's decline?
FTX filed for bankruptcy in the same week as the midterms, followed by withdrawal freezes at BlockFi and Genesis. A 75-basis-point Fed hike also occurred, and Bitcoin later bottomed near $15,500.
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What pattern does the analysis identify across the three cycles?
It points to crypto-specific shocks hitting during periods of tight money or weak liquidity. It cautions that the three episodes involved different catalysts and are too few to establish a dependable pattern.
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Which near-term indicators does the analysis highlight?
It highlights jobs and CPI reports as relevant to the Fed's December rate decision. The analysis says tight monetary conditions are present, but a comparable forced-seller event has not appeared.
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