Why Cryptocurrency Prices Dip Before Presidential Elections
We are just a week away from the United States Presidential election. Whether or not you took the time to vote early, or plan to vote on November 4th, you’ve likely checked your crypto holdings to see them lower than you anticipated.
Don’t panic, because if history has taught us anything, it’s that crypto prices falling before an election is normal. But why does this happen? Read on to find out!
Reason One: People Are Nervous
Elections often mean big changes for cryptocurrencies. Depending on who is elected, certain blockchains may be investigated by the SEC or face being shut down for violating laws. This is because new administration often means new laws are on the horizon.
Institutional and professional investors often don’t want to take a risk on certain cryptos too close to the election when they may not be able to sell it a few weeks from now. Even long-term investors may hold off on investing when an election is on the horizon.
That being said, the 2024 Presidential Election looks to be crypto-positive on both sides, so there shouldn’t be too many worried investors this time around.
Reason Two: People Sell to Make Campaign Donations
The individuals who support crypto are also often the individuals who like to donate to Presidential campaigns to ensure their candidate is elected. This happens both with individual and institutional crypto investors.
Thus, some individuals may sell their holdings in order to have more cash to donate. They will likely re-invest post-election, especially if their desired candidate is elected.
Reason Three: It’s Almost Christmas
The United States Presidential Election is always in November, which is the time of year when people start rerouting their income to purchase gifts for the holiday season anyway. Many people will also cash out their holdings to have a little more cash for travel and fun winter activities as well, causing some cryptocurrencies, especially altcoins to dip.
Additionally, some individuals do their Christmas shopping with crypto, meaning they sell it as part of the shopping process. While this can be concerning, this is generally something that happens every year, election or not, so it isn’t anything to be concerned about.
Reason Four: The Stock Market
While crypto often mirrors the stock market, occasionally, there are times when the crypto market is the inverse of the stock market. This typically happens when the fiat stock market is doing especially well, and institutional investors pull their crypto investments to invest more heavily in fiat.
To find out if this is the case, look up investing news for today. If the market sentiment is overall poor, it’s fair to assume that the sentiment in the crypto market will also be poor. But if the regular stock market is spiking, be prepared as institutional investors may begin shifting funds.
Reason Five: We Are in a Recession
Even though it is an election year, it’s important to consider the larger picture. All in all, the 2024 year has been a recession for the United States. Inflation is high, and products have become more expensive. Individuals and families have less money than they used to for spending, and investments are often the first spending to go.
Not only that, but if an individual or a business is strapped for cash, they may begin to sell their crypto investments even if they lose money from their initial market entry point.
Related: Is The US Dollar Going to Collapse?
Reason Six: Some Altcoins Just Crash
Of course, no list of the reasons for crypto price dips would be complete without mentioning the fact that sometimes cryptocurrencies just die. This is especially true when they are smaller altcoins that are new launches. Many of these projects start, fail to get the funding they need to stay afloat and go under a few months later.
Sadly, even more still are scams, which, once revealed, crash and burn.
So, the moral of the story is that if a token you are invested in suddenly crashes, don’t brush it off, as there may be something deeper at play. But if the token is Bitcoin or Ethereum, there is no reason to worry as these coins frequently suffer small dips and will likely rise in price again following the election.
Related: Cryptocurrency is Making Waves Around the World
Should You Sell?
Although the prices of a variety of cryptocurrencies are dropping, it’s important to keep in mind that whether or not you sell is 100% up to you. Cryptocurrency isn’t going away, and after the election, no matter who is elected, it is likely that crypto will continue to thrive—this is just a rough spot.
Obviously, if you need the money, selling your crypto holdings is always an option; just know that we expect this to be a temporary setback and that markets should bounce back following the election.
Should You Buy?
Buying crypto is another extremely personal choice. We aren’t a financial blog, and we don’t offer financial advice, but we do recommend researching any cryptocurrency thoroughly before you plan to buy.
While Ethereum and Bitcoin are likely safe pre-election buys, remember what we said earlier—some altcoins crash to never rise again. This is why you shouldn’t use the same investment research used for fiat on crypto holdings; they are entirely different industries that run on different investment factors. Factors or knowledge that influence fiat price increases or decreases may not have the same effect on crypto holdings.
We recommend discussing any potential investment decisions with someone you trust before making them.
Overall, if you want to get into cryptocurrency investing, doing so before the election isn’t the worst choice. But it’s important to remember that it may not be the best choice either. Investing in cryptocurrency, no matter how you look at it, is extremely risky and should be a decision made with caution. Because, after all, it is an election year, and we have no idea who will become the next president of the United States.
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