Crypto Market: What to Expect in Q4 2024 as US Election Nears

You can argue it, but there have never been any more apparent battle lines drawn between the red and blue armies as we have now in the lead-up to November’s presidential election in the United States. The ideological wars over economic policies, social values, and even the role of government itself are never-ending, with each party boasting dueling images of what they contend is best for America. Amidst these, the desire for a buoyant financial market and bullish crypto season is a common ground for Democrats and Republicans. 

So far, the financial markets are starting to show early signs of a reaction, combined with what promises brutal volatility in cryptocurrencies. With the election fast approaching, investors are readying for a wild ride as they face an unknown future about the fate of digital assets. Will it usher in a new era of regulations? Could it spark a bullish or bearish trend in the market? How will the prevailing political climate influence the adoption of blockchain technologies and digital currencies? These questions (and more) are what we’ll be addressing in this article. 

As they say, history always repeats itself. So, let’s deep dive into the historical impact of US elections on the financial markets before exploring what to expect from the crypto market in Q4, 2024.

Brief History of the Impact of US Elections on Financial Markets

By comparing the 2024 election cycles with the previous two, we can see what is familiar or changed in politics and our economy, including how the US drives into a season of deep political uncertainties and economic dilemmas with these cycles. Likewise, the 2020 and 2024 cycles even show similar challenges— a pandemic in 2020 or ongoing geo-political obstacles in 2024.

The Barrack Obama Era

Every election year brings unique events and lessons to learn from. For instance, the 2008 election, which saw Barack Obama elected during the height of the global financial crisis, was marked by extreme market turbulence. Equities plummeted, and investors sought refuge in safer assets, leading to a temporary flight from riskier investments, including emerging technologies and developing digital currencies. 

By comparison, Obama was re-elected in 2012 during a less volatile but recovering (not yet roaring back to full health) economy. Hence, the market positively reacted that we were staying on course with leadership leading into his final WH run, setting stocks up for continued gains, albeit while measures of risk like VIX and credit spreads eventually bottomed at year.

The 2016 Election

Like in 2008, the 2016 election, which resulted in Donald Trump’s victory, saw a dramatic shift in market dynamics. Initial uncertainty led to a post-election rally driven by expectations of deregulation and tax cuts. In both cases, these events triggered short-term volatility and longer-term trends in financial markets.

Cryptocurrencies have not been immune to the broader market reactions during election years. Only three months before Trump’s election, the leading cryptocurrency, Bitcoin, began to experience roller-coaster price moves in 2016. The uncertainty surrounding the election results and global economic concerns led to increased interest in Bitcoin as a hedge against traditional market risks. 

The 2020 Election

The 2020 election only emphasized the continued link between political events and what is happening in the crypto market. The price of Bitcoin increased up to the election on a wave of economic crisis-easing measures and an ever-weaker USD. The market saw further gains post-election, fueled by the continued expectation for fiscal stimulus under president-elect Biden and increasing institutional adoption of cryptocurrencies as an alternative asset class.

The crypto space has come a long way since then. Cryptos are now much more than a mere sideshow within the broader global financial system. But what regulation gives, it can take away as well—and the 2024 election may become an even bigger deal to crypto investors wondering how any new status quo might be subject to change at the stroke of a pen.

Key Political Issues Impacting Crypto in Q4 2024

Cryptocurrency Regulation

One of the driving factors affecting market movement in the world of cryptocurrency today is regulation by a country, and America has been one factor leading to meaningful implications across its borders. The last 12 months saw several crypto giants locked in lengthy legal battles with governments worldwide. Since then, China and Saudi Arabia have also banned cryptocurrency transactions.

In countries where cryptocurrencies are accepted, the debate about regulation and federal control remains a hot topic for various governments. In several jurisdictions (e.g., the United Kingdom), the relevant legal framework has been more accommodating for cryptoasset activities, requirements, and guidance. The UK government updated its Financial Services and Market Act, allowing it to regulate all connected crypto commodity VAR relief businesses while ensuring operational requirements are met and customer protection standards are met. Two months ago, in June 2024, the Cryptoassets (MiCA) Regulations were also introduced by the European Union through the Europe Markets and Securities Authority, along with definitions respective to crypto services and assets under regulatory controls. These regulations are set to become applicable in December 2024.

Over the past year, we have also seen similar strides by the Biden-led administration, with the Securities and Exchange Commission (SEC) taking a more active role. However, should Kamala Harris succeed in the November polls, we can expect a more stable climate for the crypto boom. But the talk about regulation and control remains very much on the table. 

Reporting on August 21, Blomberg quoted Brain Nelson, special advisor on policy to the Kamala Harris campaign team, saying: “Obviously, they’ve expressed that one of the things that they need are stable rules, rules of the road.” These points to Kamala Harris’s speech in North Carolina days before, where she promised to focus on cutting needless bureaucracy and unnecessary regulatory red tape that discourage innovative technologies while also keeping consumer protection as a focal point.

There is no direct mention of cryptocurrencies and digital assets. With these, we can expect even stiffer regulations and legal battles that highlighted major parts of the past year.

Meanwhile, Republicans have frequently pushed for a lighter regulatory touch— suggesting measures such as the Infrastructure Investment and Jobs Act would imperil innovation and further push crypto firms abroad. Others in the party support clear rules but without handcuffing innovation; they just want some certainty to encourage investment and growth. They might pursue policies that promote the development of blockchain technology and digital assets, like marginal regulatory sandboxes or tax breaks for crypto companies. It only makes investors feel even more bullish on the Republican-led government to know Donald Trump also has a personal exposure of over $1 million in digital assets. Trump has also publicly backed cryptocurrency during his campaign.

Geopolitical Implications: War and Crypto Market Dynamics

Beyond merely domestic policy questions, the shape of various global conflicts, such as the Russia-Ukraine war, the Israel-Palestine conflict, and tensions with Iran, is a key dynamic contributing to what we observe in crypto pricing.

The war between Russia and Ukraine tends to affect cryptocurrencies, generally making global markets increasingly volatile. Russian economic sanctions, energy market uncertainties, and millions of displaced people have made financial markets more volatile. Global tension is further fueled by the aging conflict in the Gaza-Israeli region and hostilities with Iran. Ripple effects could hurt energy prices, global trade, and investor sentiment as investors flock to safe-haven assets like Bitcoin. To complicate things further, cryptocurrencies can be used to circumvent sanctions or as a means for cross-border transactions in conflict areas. The U.S. election could influence how these conflicts are managed, with implications for the stability of the crypto market.

The Republican Party’s candidate, Donald Trump, boldly promises to end the war on day-1 in office. As it seems, Russian President Putin responded with an ambitious claim, saying he’s open to discussing steps to resolve the conflicts should Trump win the election. On the other hand, the Harris-Walz team’s approach seems to take the cue from the approach of the Biden-led administration— stay with the US allies (Ukraine and Israel) and double down support through the donation of mercenaries and crucial intelligence.

The end of the war and conflict, whether through dialogue or surrender, should trigger better market stability and increased investor confidence in the financial (and crypto) markets. 

Impact of Media and Public Discourse

The role of media and public discourse in determining market sentiment is highly potent, mainly when events are known to occur, like social or real-time news on stock markets. The media framing of candidates’ views on crypto and financial regulation in the run-up to 2024 will significantly influence how investors view these matters.

Traditional and social media platforms will likely amplify any crypto-related statements or policy proposals. For instance, a candidate’s announcement of a plan to regulate or ban certain aspects of the crypto market could lead to immediate market reactions, with prices potentially plummeting in response to perceived threats. Conversely, positive news, such as a commitment to support innovation in the blockchain space, could drive bullish sentiment and spur buying activity.

Global Implications of the US Election on Crypto

As we approach November, crypto investors must carefully consider their strategies to navigate potential volatility and uncertainty. One of the most critical aspects of this preparation is portfolio diversification and risk management.

• Continued Institutional Adoption

The crypto market has proven quite adaptive to technological innovation and/or shifts in market structure. This resilience will be key as we examine and respond to the opportunities—and hurdles—in 2024. Institutional uptake will likely continue and increase as we see cryptocurrencies further integrated into the worldwide financial system, enhanced by an ever-growing potential for blockchain technology across industries from finance to supply chain. The regulatory environment will dictate how this trend goes, but the overall pathway should be UP.

• Diversification Across Asset Classes

To mitigate risk, investors would likely reduce market-specific risk exposures that could arise from the election’s outcomes. Within the crypto market itself, diversification is equally important. Investors may consider holding a mix of established cryptocurrencies like Bitcoin and Ethereum, which tend to be more resilient, alongside smaller, high-growth potential assets. Additionally, diversification across different types of crypto assets, such as DeFi tokens, NFTs, and stablecoins, can help manage risk by reducing reliance on any single market segment. 

Conclusion

As the election approaches, investors may be inclined to err on the side of caution, with some seeking to de-risk their portfolios from volatile assets, including cryptocurrencies. On the other hand, short-term investors and day traders may see this volatility as an opportunity to profit from potential price swings in the crypto market.

Investors must time the market correctly to see if they will take advantage of or try to hide from these election-related market movements. Given the expected volatility, having a precise entry and exit strategy can significantly affect investment outcomes. One approach is dollar-cost averaging (DCA), where investors gradually buy into positions over time, reducing the impact of short-term volatility. This strategy can be particularly effective in the lead-up to the election, as it allows investors to take advantage of potential dips in the market without fully committing at a single price point. 

Similarly, long-term venture capital or private equity investors who focus on high-risk investments must have an exit strategy. One possible strategy would be to rebalance portfolios pre-election by cutting exposure to especially volatile crypto or taking profits from high-performing assets, thereby locking in some of those gains and reducing room for losses. 

That is true, no matter the election outcome in November— companies operating within crypto need to rapidly adapt their compliance frameworks on a robust scale. In addition to outright cryptos, blockchains have broader opportunities (e.g., the good companies building blockchain technology that could deliver significant returns over a long time). This means that as blockchain adoption continues to increase in different sectors, these investments may be beneficial in the longer term— potentially post–2024.