Bitcoin’s Price Trends Around U.S. 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.

Historical Patterns

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, as noted by Bitfinex analysts in The Block.

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

In 2016, the pre-election decline was even more pronounced, with a 30% drop occurring about three months before the election, dropping from around $750 to a low of $500.

In 2012, there was a significant 75% drop approximately 80 days before the election.

Factors Affecting Bitcoin Price Before Elections

The analysts attribute this pattern to several key factors:
– Seasonality and Market Timing: The timing of U.S. presidential elections aligns with a traditionally volatile end-of-year period for financial markets, affecting all markets, including bitcoin.
– Market Uncertainty: U.S. elections introduce significant uncertainty that triggers negative reactions in financial markets, including bitcoin. This was particularly evident during the COVID-19 pandemic’s impact on the 2020 election.
– Correlation with Traditional Markets: Bitcoin has increasingly shown correlation with traditional financial markets, particularly the S&P 500 and Nasdaq. Historically, when the S&P 500 experiences volatility, bitcoin often mirrors this behavior. However, currently, bitcoin does not show this pattern as the S&P 500 approaches all-time highs leading into the 2024 election.

Bitcoin’s Post-Election Performance

While the pre-election dip may concern some investors, historical patterns suggest that bitcoin often rallies after elections. After the 2016 election, bitcoin’s price surged as market certainty returned, a trend similarly observed in 2020.

In 2020, for example, bitcoin surged approximately 320% over the 160 days following the election. In 2016, it saw an extraordinary increase of over 2,000% within 400 days, with a notable 300% rise in just 200 days.

Currently, bitcoin’s price decreased by over 4% in the past 24 hours, trading at $59,778, with bitcoin dominance at 53.7% and ether dominance at 13.8%, according to CoinGecko data.