The 2026 US midterm elections could become an important catalyst for both equities and crypto, particularly if President Donald Trump loses control of both the House and Senate.
Prediction markets currently put the probability of a Democratic sweep at roughly 76%, while Democrats are priced at around 94%-95% to win the House and approximately 76% to take the Senate.
Bullish for the S&P 500?
A widely circulating analysis online, including one published by Michael Burry Stock Tracker account, highlights that there have been seven occasions since 1954 when a president lost both chambers of Congress to the opposition during the midterms. Interestingly, in six of the seven cases, the S&P 500 rose by an average of 2.1% in the following month alone.
The increases jump to 10.7% in the next three months, rising to 17.5% after six months, and 15.5% after one year. In all seven cases, the benchmark index was higher three, six, and 12 months after the election.
Obviously, history doesn’t guarantee future price performance, as it doesn’t mean that a Democratic sweep would automatically trigger a rally. However, there’s a possible explanation for the historical pattern: once the election removes political uncertainty, investors can price the new balance of power more clearly.
This year, the policy implications could be substantial. Reuters reported that Democratic control of Congress could bring greater scrutiny of tech companies and AI investment, slow parts of the financial deregulation agenda, and affect the trajectory of crypto legislation. President Trump would still retain veto power, limiting how dramatically policy could shift.
Not So Good for Bitcoin
After the 2014 vote, bitcoin eventually fell by over 45% within 71 days before reaching its bear-market low. In 2018, the nosedive was even more severe at almost 50% in 39 days. The 2022 election was followed by another double-digit decline, around 25% according to Ted Pillows, in just weeks.
However, that example comes with an enormous caveat, as the FTX crisis unfolded at virtually the same time. BTC fell sharply on election day as Binance announced its attempted rescue of the SBF-led exchange, which failed, and FTX later collapsed and filed for bankruptcy. Blaming BTC’s price drop solely on the midterms would be somewhat misleading.
Dealer.eth highlighted an interesting longer-term pattern: those post-election lows ultimately became the bear-market bottoms of their respective cycles. A year after the aforementioned midterms, BTC was approximately 24%, 45%, and 92% higher, respectively. Independent historical price data puts the average 12-month gain across those three periods at roughly 54%.
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