The positive post-election returns shown by historical stock market data could be a good sign for cryptocurrencies
With the results of the US election still unfolding, what effect it will have on cryptocurrencies remains to be seen, but this election has already seen some involvement from the crypto sphere.
Firstly, Ripple announced this week that they had joined Civil Alliance, a group of almost 1,000 companies and CEOs advocating safe and accessible access to voting, and advising patience while the votes are being counted. Their commitments included offering paid leave to employees while they voted and helping out at polling stations.
Also, this year sees the Associated Press (AP) using blockchain for the first time in its application programming interface (API). Associated Press will be posting election race calls to Everipedia, a blockchain-based alternative to Wikipedia, as well as on the Ethereum and EOS blockchains.
Meanwhile, the price of Bitcoin rallied to $14,081.45 late last night, the second highest price since the start of 2018, but then dropped almost 4% to $13,530. Traditional markets also saw some turbulence today amid political uncertainty following President Trump’s threat to stop counting votes.
As for how Bitcoin price will move after the election, a good indicator could be past stock market behaviour. Elections tend to be good for the stock market regardless of who wins, as stocks will either go up or present a buying opportunity.
Historical stock market data from 1945 onwards shared by Yahoo Finance last week showed that the average return one year after an election was highest following a Democrat win at 14.28% compared with 1.52% for a Republican win. It also showed an 11.65% average return for an incumbent win and only a 2.44% average return for an incumbent loss. So the stock market generally performs best the year after an election won by an incumbent Democrat, which obviously isn’t possible this time around.
However, every scenario showed a positive change following an election, as the purchasing power of the dollar goes down and people put their money into other things such as gold and Bitcoin. So whatever unfolds in the world of politics in the coming days and weeks, it still looks like Bitcoin could be a strong investment.