HTX Research Report: Midterm Elections and the Crypto Market — Elections Shift Policy Expectations, but Macro Conditions and Capital Flows Determine the Upside
- Core View: The U.S. midterm elections may shift expectations for crypto policy over the next two years, but near-term prices will still be determined by inflation, financing costs, and capital flows. Before and after the election, the market is more likely to see high volatility, repeated repricing, and asset divergence, making it difficult to sustain an upward move based on a single political narrative.
- Key Elements:
- The Federal Reserve raised rates by 25 basis points on September 16 to 3.75%–4.00%, the September gasoline price index rose 9.1% month over month, and core CPI rose 0.3% month over month for two consecutive months. Macro tightening caps the upside for an election-driven rally.
- The Bank of Japan adjusted its policy rate to approximately 1.25% in September. A rapid appreciation of the yen could trigger unwinding of carry trades and cross-market deleveraging; the late-October Fed and BOJ policy meetings are key macro thresholds before the vote.
- The GENIUS Act became law in July 2025. The market structure bill H.R.3633 failed to clear the Senate procedural vote threshold on September 15 by 49 to 50, while SEC rule proposals continue to advance through the administrative path.
- If Republicans hold both chambers, it could benefit policy continuity and the restart of legislation, with attention on trading infrastructure, custody, and tokenized assets; a divided Congress could lead to an initially negative price reaction followed by divergence.
- The market is currently in a "capital screening phase," with funds concentrated in a small number of assets that have good liquidity, clear business models, or explicit catalysts; ETH spot ETFs saw net outflows on nine of ten trading days, and there is little basis for a catch-up rally thesis.
- The key to upgrading a rebound into a trend lies in ETFs shifting from cumulative outflows to sustained inflows and the rate hike path no longer being revised upward; the November 6 jobs report and November 10 CPI are post-election test points.
Recently, HTX Research, the research arm of HTX, released its latest report "Crypto Market Outlook Before and After the 2026 U.S. Midterm Elections," analyzing the impact of the upcoming U.S. midterm elections on crypto market legislative pacing, regulatory intensity, and asset pricing. The report argues that the midterms may shift policy expectations for the next two years, but short-term prices will still be determined by inflation, financing costs, and capital flows. From before the election through the early post-election period, the market is more likely to experience high volatility, repeated repricing, and asset divergence, making it difficult to sustain an upward trend along a single political narrative.
An upward move requires a sequence: macro tightening expectations must first stop deteriorating, spot capital must then resume net inflows, and policy changes must ultimately translate into executable commercial opportunities. If the election only removes political uncertainty, a rebound is more likely to stem from a decline in risk premium and short covering.
Macro Constraints Cap the Upside of an Election Rally
The U.S. had already resumed rate hikes before the vote. On September 16, the Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75%–4.00%. Data released by the U.S. Bureau of Labor Statistics on October 14 showed that the gasoline price index rose 9.1% month-over-month in September, while core CPI rose 0.3% month-over-month for two consecutive months, indicating that inflationary pressure is not coming from energy alone. Elections can change policy expectations, but they cannot directly lower the cost of holding positions.
Cross-market risks also need to be factored in. The Bank of Japan raised its policy rate target to about 1.25% in September. A rapid appreciation of the yen could trigger unwinding of carry trades and cross-market deleveraging. There are two more macro hurdles before voting day: the Fed's meeting on October 27–28, followed immediately by the Bank of Japan's meeting on October 29–30. If both sides prove more hawkish than expected, deleveraging pressure could overshadow political themes.
Different Seat Combinations Will Bring Different Policy Pricing
To discuss the election's impact, one must first distinguish between institutions already in place and expectations yet to be realized. The GENIUS Act was signed into law in July 2025; the market structure bill H.R.3633 failed to clear the threshold in a Senate procedural vote on September 15, with 49 votes to 50; the SEC's rule proposals and tokenized securities exemptions are advancing along a separate administrative path. Changes in congressional seats affect whether these policy tools can be used and how costly they are to advance. Even if one party controls both chambers, specific provisions will still form different voting coalitions.
If Republicans retain both chambers, the market may first trade on policy continuity and legislative restart, with trading infrastructure, custody, and tokenized assets attracting more attention; the downside risk comes from macro, as expectations of fiscal expansion or increased Treasury supply could push up the dollar and yields, offsetting industry tailwinds. A divided Congress means higher costs for negotiation and oversight, and price reactions are more likely to be negative first and divergent later: risk premiums rise for projects reliant on rapid legislative progress, while platforms with clear business boundaries and well-defined revenue are relatively stable. If Democrats win both chambers, regulatory oversight will carry more weight, but institutions already enacted into law will not lapse. If stricter disclosure and asset segregation can enhance institutional trust, some compliant operators may actually benefit.
The Election's Impact on Various Assets Will Diverge
HTX Research defines the current state as a "capital screening period": capital is more willing to concentrate in a small number of assets with good liquidity, clear business models, or explicit catalysts, rather than take on risk across the entire altcoin market.
BTC is the first-layer asset for observing macro risk appetite and institutional capital. When the dollar and real financing costs stabilize and ETF net demand recovers, it may benefit first; precisely because it has the best liquidity, it may also be sold first when risk budgets are cut. To judge the quality of a rally, watch whether BTC's declines narrow when negative news emerges and whether gains are retained after positive news. ETH, meanwhile, needs to prove the value of its additional risk exposure; during the same period, its spot ETFs saw net outflows on nine of ten trading days, and the notion that "ETH will naturally catch up after BTC rebounds" lacks sufficient basis.
Other assets' sensitivity to the election depends on their respective sources of value. High-performance public chains have greater growth elasticity but depend more on marginal risk budgets, and whether token unlock schedules can match the scale of returning capital is key. Opportunities in DeFi lie in revenue quality and liability boundaries; policy clarity may lower barriers to institutional adoption, but may also increase obligations for front-ends and operators. In a high-rate environment, growth in stablecoin and RWA businesses can be independent of token prices, and business expansion coinciding with declines in some governance tokens is not contradictory. Tokens with low float and high fully diluted valuations may rise quickly on modest buying but struggle to accommodate exits of equivalent scale.
Whether the Post-Election Rebound Can Continue Depends on Simultaneous Improvement in Capital and Rates
The report's base case is selective repair amid high volatility: after election results become clear, the market may see a round of risk re-engagement, but the repair will first concentrate in a few assets. Whether the rebound can escalate into a trend depends crucially on whether ETFs can shift from cumulative outflows to sustained inflows and whether the rate hike path stops being revised upward. If inflationary pressure persists, cross-market financing tightens, and this overlaps with credit risk, expectations for a post-election rally need to be lowered. After voting ends, the tests will come quickly: the U.S. Bureau of Labor Statistics will release the October employment report on November 6 and October CPI on November 10.
In its April report "The Hormuz Shock, the U.S. Midterm Elections, and Crypto Market Repricing," HTX Research listed the midterm elections as the second-layer important variable affecting the crypto industry. This piece is a stage update ahead of voting day. HTX Research will continue to track evidence changes around the two central bank meetings in late October and the voting and economic data releases in early November under this framework.
Note: The content of this article is not investment advice, nor does it constitute an offer, solicitation, or recommendation for any investment product.
About HTX Research
HTX Research is the dedicated research department under HTX, responsible for in-depth analysis across a wide range of fields including cryptocurrencies, blockchain technology, and emerging market trends, writing comprehensive reports, and providing professional assessments. HTX Research is committed to providing data-driven insights and strategic foresight, playing a key role in shaping industry views and supporting informed decision-making in the digital asset space. With rigorous research methods and cutting-edge data analysis, HTX Research remains at the forefront of innovation, leading industry thought development and promoting deeper understanding of evolving market dynamics. Visit us.
