The United States is voting in crucial midterm elections, and crypto enthusiasts are paying close attention. Americans went to the polls today in a pivotal midterm election.
Today, the House, one-third of the Senate, 31 gubernatorial seats, and a slew of state and local offices are up for grabs. The outcome will almost certainly significantly impact the direction of crypto regulation and countless other decisions that may impact crypto markets.
Compared to previous midterm elections, the 2022 midterms are expected to have a disproportionate impact on the American political landscape. The intensely divided community is vying for critical levers of power at all levels of government, despite rising inflation, the ever-present fear of recession, concerns about electoral integrity, deep divisions over identity politics, and key social issues.
Concerns About Cryptocurrency
While crypto enthusiasts in the United States typically oppose traditional party lines, there is some agreement that a Republican Congress may be more favorable to the industry than continued Democratic control in the House.
Democrats are more vocal in their opposition to cryptocurrencies and digital assets in general. Senator and 2020 presidential candidate Elizabeth Warren (D-MA) is one of the Party's most Vocal critics of cryptocurrency, comparing it to "snake oil" in 2021. Perhaps the only other Democrat in Congress who dislikes crypto assets more than Warren is Representative Brad Sherman (D-CA), who once advocated for cryptocurrency prohibition before admitting this fall that that ship had sailed.
Nonetheless, some Democrats support favorable crypto legislation and have made efforts to cooperate with Republican crypto advocates, who outnumber Democratic advocates. The most notable of these is a bipartisan bill introduced by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY).
Predicting Market Movements
Markets have historically risen in the aftermath of midterm elections. Since 1931, the S&P500 has gained 6% on average between September and December, according to Capital Group, RIMES, and Standard and Poor's data.
This year, however, things may be different. Markets dislike uncertainty, and there is good reason to believe that confusion and disinformation will spread on social media as the polls close.
Furthermore, an unusually large number of election deniers are presently running for office at all levels of government; some have even stated that if they do not win, they will refuse to accept the results.
As a result, it is not surprising that there will be confusion and discord over who will control the next Congress in the coming days, and the markets, including cryptocurrency, will most likely react negatively.
Nonetheless, it is widely assumed that a clear Republican victory would be more beneficial to the crypto space, at least in the short term. Prominent Republican Senators such as Pat Toomey (R-Pa.) and Lummis have expressed strong support for Bitcoin. While there are pro-Bitcoin Democratic Senators, Republicans have recently emerged as the more crypto-friendly party.
Furthermore, during Biden's presidency, inflation has skyrocketed as the Federal Reserve continues to struggle to battle the worst effects of quantitative easing during the COVID-19 pandemic. It is widely assumed that the excessive cash pumped into the economy from emergency expenditure is the primary culprit, prompting the Fed to raise interest rates this year aggressively.
This, however, has created its own set of issues, as market contractions have inevitably occurred throughout the world. With the macroeconomic backdrop remaining weak and a potential recession looming, many investors are banking on a shift in the government to turn the market around.
What to Look Out
Election Day 2022 may also go down in crypto history for other reasons. The news that FTX.com would be obtained by Binance today shook the entire market following days of speculation about liquidity issues. FTT, FTX's native token, has collapsed, and an unknown level of contagion appears to be spreading through the markets. Today, Bitcoin hit new yearly lows, briefly touching $17,579. Ethereum has also taken a hit, falling 14% on the day to $1,329.
As a result, it appears unlikely that anything that occurs in the next 24 hours will miraculously turn the market around. However, the next Congress will be critical in determining the industry's long-term future, and it may go in one of several very different directions.
The results are not anticipated until late this evening at the most; however, some vote counts may take several days to certify. Because social media can be rife with misinformation, readers are encouraged to double-check any results found on such platforms with multiple credible sources before accepting potential misinformation.
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