Fear grips crypto as odds rise of a Democratic sweep in US midterms

Sentiment among crypto traders swung heavily risk-off as US voters went to the polls for Tuesday's midterm elections. Polymarket, a prediction market, put Democrats' odds of taking both the House and the Senate at 74%.

Owners of bitcoin and shares of crypto companies are directly exposed to the outcome, since the next Congress will decide whether long-stalled digital asset legislation gets a path forward.

Why a Democratic Sweep Has Crypto Traders on Edge

Republican control of Congress is widely considered the friendlier scenario for crypto, according to analytics firm Santiment. The firm's tally of bearish election posts hit its highest reading in a month of data.

The central point of contention is the CLARITY Act, which would hand regulatory authority over crypto to both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The Senate blocked it on September 15 by a 49-50 vote, 11 votes short of the 60 required.

The stakes are visible in Ohio. Crypto-focused super PAC Fairshake spent $41 million in 2024 against Democrat Sherrod Brown while he chaired the Senate Banking Committee, the body with jurisdiction over crypto.

Brown lost. This year, Fairshake set up a $30 million campaign to stop his comeback. Polymarket continues to put Brown at 73% to oust Republican Jon Husted. Ohio polls shut at 7:30 p.m. ET.

Is the Election Day Panic Overblown?

At the time of writing, bitcoin was trading at $77,768, up a modest 0.2% over the past 24 hours. Santiment contends that widespread crowd fear can be a sign that a turn is near.

“Extreme bearishness can also become a useful counter-signal,” the market intelligence and behavioral analytics platform indicated.

The firm said bitcoin holding $76,500 to $77,000 would improve the odds of a relief rally. A move back above $79,000 would add strength to that signal, while a firm break below $76,000 would confirm the fear.

That pattern cuts both ways. On October 23, Santiment flagged that the crowd was optimistic about the midterms; bitcoin lost ground in the sessions that followed.

Congress may also move markets less than traders expect. Bitcoin climbed after the CLARITY Act failed in September, when Federal Reserve rate hikes were seen as the larger influence.

The historical record is punishing. In the wake of the 2018 midterms, bitcoin sat 46% below where it closed on election day at the three-month mark; a year after the vote, it was 45% higher than that close.

Polymarket sees an 81% chance that the Associated Press will have called the House by Wednesday's end. Traders, for now, are fixated on $76,000 as the key line to watch.