Midterm elections conclude with a Democratic landslide, financial markets rebound in response

Original | Odaily@OdailyChina)

Author | Wenser (@wenser 2010 )

On the afternoon of November 4 (Beijing time), the U.S. midterm elections came to a close. In the end, the Democratic Party swept both the Senate and the House, reclaiming the majority. This matched our earlier prediction in the article "The Final 36 Hours of the U.S. Midterm Elections: A Golden Opportunity for U.S. Stocks and Bitcoin?".

In the Senate, Republicans held a 53-47 majority before the election, and Democrats needed a net gain of four seats. Instead, Democrats pulled off six "red-to-blue" flips in one go: Texas, Kansas, South Carolina, Ohio, North Carolina, and Iowa all fell into Democratic hands. In the House, Democrats won 234 seats, far exceeding the 218-seat threshold for a majority—a resounding victory by any measure.

With Democrats controlling both chambers, although there is still a two-month buffer period, the Trump administration is about to face difficult times, and Democrats will next launch attacks on the Republican Party's "legacy issues."

A Victory for the Democrats: Multiple Deep-Red States Flip Blue

Let's start with the House. Most of the seats Democrats flipped this time were in districts Trump won in 2024: all three Republican incumbents in Pennsylvania—Ryan Mackenzie, Rob Bresnahan, and Scott Perry—lost; Virginia's Jen Kiggans and Colorado's Gabe Evans also fell; North Carolina, a district Trump won by more than 9 points two years ago, was ultimately taken by Democratic farmer candidate Jamie Ager.

The Senate side was even more dramatic: South Carolina's Annie Andrews won a Senate seat for Democrats after 28 years; Texas had been out of Democratic hands even longer—no Democratic senator had come from the state since 1988—but Democrat James Talarico ultimately defeated Ken Paxton to reclaim this former "Republican territory."

The subsequent races also followed the Democratic script: according to NBC projections, Ohio's Sherrod Brown defeated incumbent Senator Jon Husted 48.8% to 46.3%. Kansas's Adam Hamilton beat Roger Marshall 51.1% to 45.9%, and Iowa's Josh Turek defeated Ashley Hinson 50.5% to 46.4%. The last time Kansas elected a Democratic senator was decades ago.

Democrats also held their own ground, with Ossoff in Georgia and New Hampshire both retaining their seats. Michigan's El-Sayed is currently leading, though CBS still lists it as a toss-up—it only affects the size of the majority. At the gubernatorial level, Georgia's Keisha Lance Bottoms won the first flipped gubernatorial seat of the night, becoming the first Black woman elected governor in the United States. ABC projects that Ohio's Amy Acton defeated Vivek Ramaswamy, and Texas's Gina Hinojosa also won the governorship.

Why did Republicans lose so badly? The polls actually explained the answer. A national exit poll conducted jointly by NBC and other media outlets showed that Trump's approval rating among voters was only 38%, compared to 45% during his first midterm elections in 2018. 39% of voters listed the economy as their top issue, 65% believed Trump's policies had made the economy worse, and 62% held him responsible for high prices. 43% said one of the reasons they voted was to express opposition to Trump—higher than in 2018.

Gas prices, grocery prices, electricity bills, plus the eight-month war with Iran and tariffs imposed on allies—voters laid all of these at the feet of the White House and Trump.

The Crypto Industry's Most Expensive Bet: $63 Million in Political Donations Down the Drain

For the crypto world, the most noteworthy race of the night was in Ohio.

Democrat Sherrod Brown, a former Senate Banking Committee chairman, is widely regarded as one of the toughest opponents the crypto industry has ever faced. In 2024, Fairshake's Defend American Jobs spent over $40 million to help Republican Bernie Moreno unseat him. This time, Brown was back to contest the seat left by Vice President Vance.

According to media reports, Fairshake-affiliated super PACs (political organizations that can spend unlimited amounts on advertising) poured more than $50 million into this election to oppose him. Cointelegraph calculated that, including the Digital Freedom Fund backed by the two brothers who founded crypto exchange Gemini, the crypto industry spent approximately $63 million in Ohio altogether.

In the end, Brown won—arguably the most expensive money-down-the-drain moment in the history of crypto political donations.

What's worse is that the crypto industry's old friends in Congress are leaving one by one: Senator Cynthia Lummis, a staunch crypto supporter, did not seek reelection; with Democrats winning the House majority, House Financial Services Committee Chairman French Hill may also be replaced.

For the crypto industry, the few pieces of good news are that Andy Barr won the Kentucky Senate seat, and Bill Hagerty, the primary sponsor of the stablecoin bill GENIUS Act, is also far ahead in Tennessee and is essentially assured of reelection. Nevertheless, the crypto industry is inevitably facing more scrutiny.

The Awkward Position Left for the Crypto Industry and Trump

After Democrats swept both chambers, the first things the crypto industry and Trump will have to confront are the CLARITY Act and Trump's crypto income.

The former stalled at the Senate voting stage this year, falling short by as many as 10 votes in the procedural vote. At the time, Democrats' core demand was an ethics provision to restrict public officials from profiting from crypto businesses. Democratic negotiator Ruben Gallego said before the vote that Republicans "care more about ensuring the president keeps making money than actually delivering regulation." Senator Lummis also said on the day of the vote that if the procedural vote failed, "it's over." The lame-duck period before new members of Congress take office on January 3 next year now appears unlikely to allow further progress.

As for Trump's crypto income, last year's $1.4 billion figure already crossed Democrats' bottom line. Robert Garcia, who is set to take over as chairman of the House Oversight Committee in January next year, has already vowed to focus on investigating corruption in the Trump family, especially its crypto businesses. Trump family projects like WLFI may next face one hearing after another.

Although the crypto industry was far from a focus compared to issues like prices, the economy, and gas prices in this midterm election, the Democratic victory has demonstrated at this stage that crypto is no longer the social focal-point industry it once was.

Of course, the SEC and CFTC will still advance crypto-friendly policies at their own pace, but without support at the congressional level, the momentum will undoubtedly be significantly diminished compared to before.

AI, U.S. Stocks, and Macroeconomics: Markets Briefly Turn from Losses to Gains

Before the midterm election results came out, both U.S. stock markets and crypto markets were in decline, with BTC briefly falling below $76,000. After the news of Democrats sweeping both chambers was confirmed, BTC briefly rose above $78,000, and gold briefly broke through $4,000. South Korea's KOSPI index turned from losses to gains, erasing a previous 4% drop; the AI sector also turned positive with a modest rebound.

Currently, after Democrats secured majority seats in both chambers, tighter restrictions on data center construction and stricter regulation of AI and big tech companies may become reality, and the AI sector may continue to face pressure going forward.

Over the next two years, U.S. politics will enter a divided and gridlocked situation: both chambers of Congress can issue subpoenas, hold hearings, and block budgets, and senators can also impose limits on presidential nominations. But on the other hand, bills and policies Democrats want to advance can still be vetoed by Trump as president, and Democrats' vote count is far short of the two-thirds needed to override a veto. There will be fewer new laws and more investigations, and old problems like the debt ceiling will likely play out all over again.

No wonder Trump once said in an interview: "Historically, you just have to exercise the veto for a few months in a row, and then they come to you and say, 'We have to make a deal.'"

Epilogue: The Crypto President Is Still Here, but the Crypto Congress Is Gone

After the flip of both chambers, Trump's nominations and appointments over the next two years will face stricter limits. For the crypto industry, lobbying targets will also gradually shift from Trump and Republicans to a Congress controlled by Democrats. The "good old days" of the past two years—when the president staged TACO episodes and markets rose and fell accordingly—are probably coming to an end.