Democrats control Congress, BTC unexpectedly rebounds back to 80,000

According to Woofun AI, the dust settled in the US midterm elections, and the Democratic Party successfully took control of both houses of the Senate and the House of Representatives. This drastic change in the political landscape did not trigger a sell-off of crypto assets as previously anticipated by the market, but instead prompted the BTC price to unexpectedly rebound and return to the $80,000 mark.

This market reaction, which is contrary to the “Republican-friendly crypto” narrative in the past, reveals the dominant position of uncertainty elimination and microstructural games in current pricing logic, rather than simply driven by policy expectations.

Judging from the microstructure of the market, this rebound first stemmed from the release of risk premiums after the “boots landed”. In the final stage before the vote, the market fell into a state of extreme wait-and-see, and trading volume shrank significantly. The BTC price was suppressed by death and fluctuated within a narrow range of 76,000 to 79,000 US dollars. The bulls were afraid to increase their positions, and the bears were afraid to retreat rashly. The clear election results, regardless of which party they belong to, instantly eliminated the greatest uncertainty hanging over the market. Second, the bears' squeeze effect is remarkable. The previous week, the price of BTC fell below $80,000, and on-chain data showed that sellers continued to cut meat and exit the market below $80,000, showing the longest daily net realized loss since mid-August. Since short positions are heavily piled up in this position, once the price breaks through the key resistance level upward, the stop-loss order forms a boosting force.

According to data compiled by Woofun AI, although it is difficult to completely distinguish the ratio between active buying and short compensation from trading volume, judging from the steep extent of the price increase, the contribution of short compensation is not small. The deeper reason is that the market is becoming aware that the actual policy differences between the two parties regarding the crypto industry may be overestimated. Over the past two years, the promotion of crypto legislation in the National Assembly has not been dominated by a single party, and there is also a group of members of parliament within the Democratic Party that clearly support the development of the industry. The key variables that really determine the industry space are not congressional majority-party affiliation, but rather the enforcement scale of regulators such as the SEC and CFTC, and the degree of acceptance of crypto assets by the traditional banking system. These variables are linked to partisan politics, but they are by no means a simple linear correspondence.

Looking back at historical data, the direct impact of elections on BTC pricing is often overinterpreted. Within 12 months after the 2014, 2018, and 2022 midterm elections, BTC rose by about 24.5%, 44.9%, and 92.3%, respectively;

However, in the three election years themselves, the annual declines were as high as 56%, 73%, and 64%, respectively. The time points that appear at the bottom are 71 days, 38 days, and 13 days after selection, respectively. This set of data seems to support the “post-election rebound” logic, but the common background is that they all caught up with the starting point of the easing cycle or easing expectations. Given that there are only three samples and various macroeconomic backgrounds, it is difficult to determine whether the election itself is playing a role or whether liquidity easing dominates the market. Therefore, the short-term rebound only proved that the elimination of uncertainty can bring about phased market conditions; it does not prove that the trend has reversed. The position of $80,000 has been tested repeatedly over the past month, and standing firm today only recouped last week's losses. There are still two core variables that actually determine the next trend: the first is whether the total stablecoin market value can return to expansion. After peaking at US$312.3 billion at the end of May, the indicator declined continuously, rebounded briefly in August and September, and fell again to US$294.6 billion since October. This is a reservoir of capital in the market. If the pool does not rise, it will be difficult for the rebound to last; second, when will the Fed's balance sheet expand again. Arthur Hayes pointed out the day before that BTC will remain weak until the table is extended. These two macroeconomic fundamentals have not changed, and the election results cannot change their trajectory.

In summary, today's rebound is more like a pricing correction, or even a retaliatory release of pre-election depression rather than the opening of a new narrative. The market spewed out the pre-election backlog of risk premiums; that's all. After the Democratic Party takes control of the National Assembly, the next focus should not be limited to its oral statements, but should closely monitor the implementation of its actual policies and specific actions at the level of supervision and implementation. Until the inflection point of liquidity occurs, any trend bullish logic based on political results appears to be unfounded.