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Bitcoin's price trend before and after previous U.S. elections consistent: analysts

Bitcoin's price trend before and after previous U.S. elections consistent: analysts

The BlockThe Block2024/08/28 12:12
By:Brian McGleenon

Around two or three months before the last three U.S. presidential elections, bitcoin’s price has posted a significant drop.However, historical patterns also show that the digital asset consistently rallied in the months after the elections.

In the lead-up to the last three U.S. presidential elections, bitcoin's price has demonstrated a consistent pattern — experiencing a notable downturn around two or three months before each election.

"In previous election cycles, such as in 2016 and 2020, bitcoin experienced notable dips before the election, followed by substantial post-election rallies. This pattern was also observed in 2012, indicating a recurring trend linked to the election season," Bitfinex analysts told The Block.

Two months before the 2020 U.S. election , bitcoin experienced a sharp 16% drop, according to Coingecko data . Approximately two months before the November 3, 2020 election, bitcoin’s price fell from around $12,000 to about $10,000. After a period of volatility, it then experienced a recovery around the time of the election.

In 2016, the pre-election decline was even more pronounced, with a 30% drop occurring about three months before the election. Coingecko data shows the digital asset's price fell from around $750 to a low of $500, a decline of over 30%, approximately three months before that year's election.

In the early days of the digital asset's history, in 2012, there was a significant 75% drop approximately 80 days before the election.

Factors affecting the price of bitcoin before U.S. elections

The analysts said this pattern can be attributed to several key factors, such as seasonality and market timing, market uncertainty, and correlation with traditional markets.

"The timing of U.S. presidential elections aligns with the end-of-year period, the months leading up to that is traditionally volatile for financial markets, especially summer, this seasonality affects all markets, including bitcoin," Bitfinex analysts said.

The analysts added that U.S. elections introduce significant uncertainty, which financial markets, including bitcoin , typically react negatively to. "The uncertainty surrounding future economic policies, regulatory changes, and overall political stability creates a risk-averse environment. For example, during the 2020 election, bitcoin's price fluctuated sharply due to the combined uncertainties of the election and the COVID-19 pandemic," the analysts added.

Another factor is the correlation with traditional markets, with bitcoin having increasingly shown a correlation with traditional financial markets, particularly the SP 500 and Nasdaq. "When the SP 500 experiences volatility or a pullback, bitcoin often mirrors this behavior," Bitfinex analysts said. Currently, bitcoin does not show this pattern, as the SP 500 is approaching all-time highs leading up to the 2024 election.

The price of bitcoin has performed a consistent trend before and after U.S. elections. Image: The Block.

Bitcoin's post-election historic performance

While the pre-election dip might raise concerns for some investors, historical patterns suggest that bitcoin often rallies after elections. "After the 2016 election, bitcoin's price surged as market certainty returned. A similar pattern was observed in 2020, where bitcoin’s price increased sharply in the months following the election, driven by renewed confidence in the market and economic recovery efforts," Bitfinex analysts said.

In 2020, for instance, bitcoin surged approximately 320% over the 160 days following the election. Similarly, in 2016, the cryptocurrency experienced an extraordinary increase of over 2,000% within 400 days, with a notable 300% rise in just 200 days, according to Coingecko data.

The price of bitcoin decreased by over 4% in the past 24 hours to trade at $59,778 at 6:49 a.m. ET. Bitcoin BTC -3.86% dominance is at 53.7%, and ether dominance is at 13.8%, according to CoinGecko data.


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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