- Cryptocurrency markets generally slow down after a U.S. presidential inauguration, with more significant effects following Republican wins.
- Cryptocurrencies and U.S. stocks show changing correlation patterns, which could influence market responses to political events.
The inauguration of a U.S. president has historically been a moment of reassessment for financial markets, including the realm of cryptocurrencies. As we approach another presidential transition, the question arises: could the crypto market experience a downturn post-inauguration?
Historical Patterns and New Trends
Typically, U.S. presidential elections and subsequent inaugurations mark a cyclical impact on financial markets. A study by TS Lombard highlights that after initial post-election gains, markets tend to consolidate.
Cryptocurrencies have not been exempt from this trend, often experiencing robust growth in the immediate aftermath of an election, driven by key market dynamics, before entering a period of stagnation once the new president is officially in office.
This phenomenon has been particularly notable during Republican transitions. Analysis from Bloomberg and Macrobond Financial underscores a clear pattern where risky assets like cryptocurrencies show significant growth after election results are declared, only to taper off following the inauguration.
Strategic Considerations
Scott Chronert, a strategist at Citi, advises caution during this potential post-election rally. He suggests taking profits, especially if the S&P 500 surpasses 6,100 points—about 5% above its current level—indicating a temporary peak before a possible pullback.
However, it’s important to note that these phases of consolidation are generally short-lived, with recovery often observed a few months after the new president takes office. The evolving dynamics within the crypto markets, as detailed by Binance Research, also point to significant changes.
The traditional correlation between Bitcoin and U.S. stock markets has weakened considerably, with the rolling 30-day correlation coefficient between Bitcoin and the Nasdaq dropping to 0.46, a five-year low since March 2024.
Meanwhile, Ethereum shows a higher correlation with U.S. tech stocks, standing at approximately 0.66 according to MacroAxis.com. This divergence suggests a maturing Bitcoin market that may now react differently to U.S. political events.
Despite the evolving market conditions, Ryan Lee, chief analyst at Bitget Research, anticipates a potential 30% correction in Bitcoin before a new upward cycle commences, potentially driving prices back towards $70,000.
Investor consensus, as reported by MV Global, remains optimistic about the growth of the crypto market into the second half of 2025. Assets like XRP are expected to reach historical highs post-inauguration, tempering concerns over the lasting negative impacts of political changes on the sector.
As the inauguration approaches, both investors and market analysts will closely watch these patterns and correlations, ready to navigate through the evolving landscape of the cryptocurrency markets.