Author: Gemini, DeepChain TechFlow
On November 3, as the U.S. midterm elections approach, discussions about the "risk asset curse" often resurface in the market.
On a macro level, the midterm elections do impact risk assets, primarily due to "policy uncertainty." Who controls Congress directly affects key issues such as future fiscal spending, tax policies, regulatory intensity, and the debt ceiling.
These expectations are likely to be priced in by the market before the election; as uncertainty rises, capital naturally becomes more cautious, and risk appetite declines.
Today’s BTC has been widely absorbed by traditional financial channels and is increasingly resembling a high-beta risk asset, with its correlation to U.S. equities, U.S. dollar liquidity, and global risk sentiment becoming significantly stronger.
Therefore, policy expectation shifts resulting from the midterm elections are likely to be reflected in BTC’s price action; however, note that this does not mean BTC is directly tied to election outcomes—rather, during this cycle, it has become evident that BTC’s sensitivity to macro risk appetite has been significantly heightened.
So, how much real damage have midterm elections caused as macro-level shocks in history?
The notion that "every election leads to a price drop" is not valid.
We analyzed BTC market data surrounding the past four U.S. midterm elections (2010, 2014, 2018, 2022) and found that the widely held belief of “always falling during midterms” reflects a cognitive bias when examined against actual market data.
In the short term following the midterm elections, BTC exhibited significant consolidation and divergent price movements.
In 2018, one month after the election, BTC suffered a brutal correction, plunging 45.5% in a single month. However, 30 days after the election in 2010, it rose directly by 31.6%.
The notion that "the market falls every midterm election" does not apply to all timeframes. This indicates that in the short term, the election outcome did not immediately resolve divisions but instead intensified the fierce competition between bulls and bears.
At the same time, this is only a variable, and the market size, adoption, and macro conditions for BTC differ across each four-year cycle.
In the long term, over the year following the election, BTC achieved nearly absolute positive returns.
The smallest increase occurred in 2014 (+23.0%), while the largest increase occurred in 2010 (+1580.0%). The most typical case is 2018, when a post-election decline did occur, but holding longer changed the outcome—with a still-positive return of 45.2% after one year.
Liquidity trap and chip reallocation
Large-scale capital is not afraid of long-term policy fluctuations; on the contrary, the short-term macroeconomic uncertainty brought by elections is precisely the natural scenario they use to exchange positions.
Amid risk-off sentiment surrounding election-related events, highly leveraged long positions and panicked retail investors are prone to a cascade of selling, surrendering their positions at steep losses within 30 days after the election. Meanwhile, smart money capitalizes on the liquidity traps created by this macro noise, absorbing retail sell-offs at lower levels to build long-term position accumulations.
We also mentioned in another article that over the past month, the rate at which on-chain whales have been accumulating BTC has accelerated, reaching a new high since February this year.
(Recommended reading: Who Is Absorbing the Blood-Stained Chips? On-Chain Data Reveals a Surge in Whale Accumulation After BTC Drops Below $81,000)
For BTC, the so-called "midterm election curse" is more like a reallocation of positions fueled by macro noise. Funds that exit due to short-term macro panic often end up as excess returns on someone else's financial statements a year later.
(Risk disclaimer: The historical data sample consists of only four instances, which is relatively limited. The current U.S. interest rate environment and ETF funding structure differ significantly from past cycles. This article is solely an objective data review and does not imply guaranteed future performance; secondary market participants should remain cautious of short-term liquidity risks.)