Will Crypto Rally After the Midterm Elections? If History Is Any Guide, This Happens Next.

Although most investors try to avoid daily headlines and not focus too much on politics when evaluating stocks, they also know that politics can't be avoided altogether.

After all, policy and regulation can have a big effect on many stocks. That's why investors pay attention to the U.S. midterm elections. If there is a change in the controlling party in Congress, it could affect a sector's outlook.

Since President Donald Trump took office and the Republicans gained control of Congress in early 2025, cryptocurrencies have enjoyed a much more supportive regulatory environment.

But what will happen to crypto after the midterms? Will the sector rally after a tumultuous year? If history is any guide, this will happen next.

Image source: Getty Images.

What has happened historically?

Equities have historically enjoyed a strong run after midterm elections, and so has crypto in its short existence.

Bitcoin (CRYPTO: BTC), the world's largest cryptocurrency by market value, was essentially created right after the worst of the 2008 Great Recession, when many people lost faith in the mainstream financial system. It was originally viewed as an alternative currency, although it has since morphed into an investment.

This means it has been around for four midterm elections. The end of midterms has historically led to a rally in stocks because it removes uncertainty and provides the market with greater clarity on what policy and regulation could look like during the next two to four years.

Crypto is often more volatile than equities, so it's not a huge surprise to learn that Bitcoin, a bellwether for crypto, has performed exceptionally well in the year after midterm elections, according to data from TradingView and CoinDesk:

2010-11: 1,579%

2014-15: 24.1%

2018-19: 44.9%

2022-23: 92.1%

The crypto market was still in its early stages in 2010 and much smaller than it is today. Excluding that cycle, Bitcoin gained an average of 54% in the year after the past midterm elections, according to CoinDesk.

The situation for this upcoming cycle

Investors should remember that although history rhymes, it rarely repeats, so this time could certainly be different.

As I mentioned, crypto has enjoyed a very friendly regulatory environment in the U.S. Trump has issued executive orders to create a U.S. Strategic Bitcoin Reserve and to make it easier for retirement accounts to invest in crypto.

Additionally, Congress has passed legislation such as the Genius Act, creating a regulatory framework for stablecoins. However, Republicans have been unable to pass the Clarity Act, which would clear up many regulatory gray areas, such as which regulatory body has jurisdiction over certain cryptocurrencies.

Democrats aren't entirely opposed to passing crypto legislation. If they regain control of the U.S. House of Representatives and Senate, which they are favored to do, they will likely, at the very least, require more concessions from Trump, such as adding more ethics provisions to the bill.

The other thing to remember is that crypto is still a fairly new industry, having only really been established in early 2009. Four midterms isn't a huge sample size, and it's really only three, given how small the crypto market was in 2010.

Additionally, investors should consider that Bitcoin tends to benefit from its halving event, which occurs every four years. During this event, miners see their rewards for validating Bitcoin transactions and minting new blocks cut in half.

That effectively slows supply growth, which is the main reason investors purchase Bitcoin in the first place: its finite supply makes it at least appear to be a form of digital gold, and therefore a potential hedge against inflation.

Coincidentally, after Bitcoin's last four halvings, Bitcoin surged for the next 12 to 18 months or so and then fell into a bear market. These bear markets have occurred in the years leading up to midterms, so it's possible that Bitcoin and crypto began rallying after the bear market, rather than due to midterms.

That doesn't mean Bitcoin and crypto won't surge after midterms. But investors should remember that crypto is extremely volatile, so predicting near-term outcomes is difficult.

JPMorgan Chase is an advertising partner of Motley Fool Money. Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and JPMorgan Chase. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.