As the U.S. heads into a decisive week with both the Federal Open Market Committee (FOMC) meeting and national elections, crypto traders are taking a cautious stance amid anticipated volatility. The intersection of these events is expected to test market resilience, with potential implications across both traditional and crypto markets.
This Thursday, November 7, the FOMC will announce its latest interest rate decision, with market expectations largely pointing to a 25 basis points rate cut. The timing aligns with the upcoming U.S. elections, where a close race between Donald Trump and Kamala Harris adds to market uncertainties. According to the volatility index (VIX), activity is projected to increase ahead of election day on November 5 and could spike once results come in around November 6.
For the crypto market, the political landscape and macroeconomic expectations have had considerable influence, with Bitcoin (BTC) unable to breach its $70,000 resistance last month. Altcoins have also come under selling pressure as traders adopt a defensive posture in response to the upcoming FOMC announcement and election results. Broader financial markets may follow the trajectory of the S&P 500, which has recently surged by 40%, a rally some analysts attribute to market expectations of a Republican win.
The Kobeissi Letter, a market newsletter, highlights that when the incumbent party appears likely to lose, the S&P 500 often sees tempered returns pre-election, with volatility surging in election aftermath. Year-to-date, the VIX has risen by 65%, even as the stock market has hit record highs, a trend that could spill over to crypto markets if similar volatility persists.
Notably, historical data from The Kobeissi Letter points out that election years have averaged an 11.3% positive return for the S&P 500, regardless of the winning party, with positive performance in 83% of election years since 1928.
For Bitcoin, analysts believe the upcoming FOMC and election outcomes could serve as catalysts for another major rally, with a parabolic rise toward $100,000 possible by year-end. Some speculate Bitcoin could even reach $150,000 if it mirrors the patterns seen in previous cycles.
As traders prepare for heightened volatility, the outcome of this week’s events may set the tone for the crypto market’s trajectory in the coming months.
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