Why and how the US midterm elections matter for crypto


Hello, welcome to Distributed Ledger, a weekly cryptocurrency newsletter delivered to your inbox every Thursday. I’m Frances Yue, a crypto reporter at MarketWatch. This week I’ll be bringing you the latest and greatest in the world of digital assets.

Find me on Twitter @FrancesYue_ send feedback or tell us what we should cover. You can also contact me via email to share your personal crypto stories.

Crypto in an instant

Bitcoin BTCUSD
It has lost 1.6% over the past seven days and was trading at around $20,235 on Thursday, according to CoinDesk data. Ether ETHUSD
down 0.3% in seven days to $1,539. Meme Token Dogecoin DOGEUSD
Up 67.6%, another dog-themed token, Shiba Inu SHIBUSD,
gained 7.15% compared to seven days ago.

Cryptometric measurements
Biggest Winners

Price

7% daily income

Dogecoin

$0.13

76.9%

Arweave

$14.97

40.4%

Mine Protocol

$0.75

21.4%

Phantom

$0.26

20.1%

Osmosis

$1.51

18.3%

Source: CoinGecko as of November 3rd

The biggest quitters

Price

7% daily income

WhiteBIT Token

$10.02

-25.1%

Aptos

$7.30

-20.5%

Eumos

$1.83

-19.5%

Open Network

$1.59

-18%

EthereumPoW

$6.18

-17.7%

Source: CoinGecko as of November 3rd

Impact of Midterm Elections on Cryptocurrency

The US midterm elections are less than a week away. All 435 seats in the House of Representatives and 35 of the 100 seats in the Senate are up for grabs this year.

Historically, the stock market tends to perform better after midterm elections. Some investors expect the cryptocurrency to rally beyond Election Day on November 8, as the correlation between bitcoin and major stock indexes remains high.

According to a report by Charles Schwab, in 17 of the 19 midterm elections since 1946, the stock market performed better in the six months after the election than in the six months before it.

According to Ledn chief strategy officer and co-founder Mauricio Di Bartolomeo, this is largely because investors face uncertainty in the months leading up to Election Day. “As things become clearer, investors become more confident and bid on the market,” Di Bartolomeo said.

“If history is any guide, we should get through next Tuesday and the path forward looks better,” said Timothy Holland, chief investment officer at Orion Advisor Solutions. “The season is about to get better and you’re going to pass the midterm. You’re probably going to get a divided government in D.C. and the market likes congestion,” Holland said.

Still, this year could be different, as stock market performance has already diverged significantly from its historic levels, with the S&P 500 down 27%, far worse than the index’s average in previous midterm election years.

“Given where interest rates are, I wouldn’t be surprised if this is one of the years where the rally pulls back,” according to Di Bartolomeo. On Wednesday, the Federal Reserve raised its key interest rate by 0.75 percentage points to a range of 3.75-4 percent, the highest level in 15 years.

“I believe markets will be less sensitive to any developments over the medium term than to actions by the Federal Reserve, key economic indicators or any actions by the Treasury.” said Joel Kruger, market strategist at LMAX Group.

Di Bartolomeo noted that in terms of cryptocurrency regulation, investors do not expect much impact in the medium term, as the latest initiatives on digital assets are bipartisan.

Bartolomeo noted that it may be more difficult for Republicans to pass new legislation if a Democratic president quickly passes the House or Senate. “I don’t think it’s a cryptocurrency-specific issue. I think it will slow down regulation in general,” Bartolomeo said.

One of the bills most likely to advance in Congress was proposed by Senators Debbie Stabenow, Democrat of Michigan, and John Boozman, Republican of Arkansas. If passed, the bill would significantly expand the U.S. Commodity Futures Trading Commission’s authority to regulate digital commodities, according to Jeremy Liabo, a partner at the law firm Ropes & Gray.

“If you listen to the dialogue around the bill, the criticism doesn’t follow party lines.” Liabo said. “We will see the changes before the bill comes to a vote,” Liabo said.

Doge rally

Dogecoin has surged more than 67% in the past seven days as billionaire Elon Musk, a vocal backer of the Shiba Inu-themed cryptocurrency, completed a deal to take over social media platform Twitter last week.

Some Dogecoin holders hope that Musk can spur wider adoption of the meme coin in ways such as accepting the cryptocurrency for payment on Twitter. Musk tweeted a photo of his Shiba Inu dog wearing a T-shirt with the logo on Twitter on Tuesday.

In June, Musk’s company SpaceX began accepting Dogecoin for some goods, after Tesla made a similar move in January.

Meanwhile, the CEO of Binance, the world’s largest digital asset exchange, Changpeng Zhao, known as “CZ”, said that cryptocurrencies could be used to charge some Twitter users for services. Zhao made these comments after Binance invested $500 million in Musk’s acquisition.

“We want to help solve urgent problems,” Zhao said on CNBC’s “Squawk Box” on Monday. “Memberships etc. payments can be made very easily on a global scale using cryptocurrencies as a means of payment.”

Deribit hack

Cryptocurrency exchange Deribit lost $28 million in a hot wallet hack on Tuesday, adding to at least $3 billion in losses this year from digital asset exploits.

Deribit tweeted on Wednesday that customer funds are safe while the company will use its own reserves to cover the loss. “Deribit remains financially sound and ongoing operations will not be affected,” the company tweeted.

Deribit said the hack was limited to the company’s bitcoin, ether and stablecoin USDC hot wallets, while any funds in cold storage were not affected. Hot wallets are wallets connected to the Internet, while cold storage means crypto keys are kept offline for security. I wrote more here.

Crypto companies, funds

stocks Coinbase Global Inc. COIN
It fell 8.1% to $55.80 on Thursday and is down 23% in the last five trading sessions. by Michael Saylor MicroStrategy Inc.
MSTR
Shares were up 0.1% at $248.44 on Thursday, and have fallen 8.2% over the past five days.

Mining company Riot Blockchain Inc. NOTE
shares fell 6.1% to $5.50 on Thursday, down 19% over the past five days. stocks Marathon Digital Holdings Inc.
MARA
It lost 3.7% to $10.50 and is down 23% in the last five days. Another miner, Ebang International Holdings Inc. EBONY
Shares fell 0.6% to $0.32 on Thursday, and are up 2.6% over the past five days.

Overstock.com Inc.
OSTKof
shares fell 1.9% to $21.20. Shares are down 8.9% in five sessions.

stocks Block Inc.
SQ,
formerly known as Square, fell 1.3% to $53.91, down 10.5% on the week. Tesla Inc. TSLA
shares are up 0.2% at 215.31%, down 4.3% over the past five days.

PayPal Holdings Inc.
PYPL
It fell 3.7% to $76.55, down 12.4% in five sessions. Nvidia Corp.
NVDA
shares rose 1.5% to $134.21, up 1.9% last week.

Advanced Micro Devices Inc.
AMD
shares closed down 0.1% at $60.07 on Thursday, up 2.6% over five trading days.

Among crypto funds, ProShares Bitcoin Strategy ETF
BITO
It was flat at $12.51 on Thursday, while its Short Bitcoin Strategy ETF
THE END
It lost 0.1% to $36.42. Valkyrie Bitcoin Strategy ETF
BTF
It rose 0.3% to $7.81 VanEck Bitcoin Strategy ETF
XBTF
It rose 0.1% to $19.83.

Grayscale Bitcoin Trust
GBTC
It rose 0.3% to $12.83.

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