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HTX Research's latest report interprets the midterm elections and the crypto market: Elections change policy expectations, while macro conditions and capital flows determine the market's upper limit.

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From pre-election to the early post-election period, the market is more likely to experience high volatility, repeated pricing, and asset divergence, making it difficult to sustain upward momentum along a single political narrative.

Source: HTX Research

Recently, HTX Research, the research arm under Huobi HTX, released its latest report titled "Crypto Market Outlook Before and After the 2026 U.S. Midterm Elections," analyzing the impact of the upcoming U.S. midterm elections on crypto market legislative pace, regulatory intensity, and asset pricing. The report argues that the midterm elections may alter policy expectations for the next two years, but short-term prices will still be determined by inflation, financing costs, and capital flows. From the pre-election period to the early post-election period, the market is more likely to experience high volatility, repeated pricing, and asset divergence, making it difficult to sustain an upward trend along a single political narrative.

The formation of an upward rally follows a sequential order: macroeconomic tightening expectations must first stop deteriorating, spot capital must then resume net inflows, and policy changes must ultimately translate into executable business opportunities. If the election only removes political uncertainty, any rebound is more likely to stem from a decline in risk premium and short covering.

Macro Constraints Cap the Upside of an Election Rally

The U.S. had already resumed rate hikes before the vote. The Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75%–4.00% on September 16. Data released by the U.S. Bureau of Labor Statistics on October 14 showed that the gasoline price index rose 9.1% month-over-month in September, while core CPI rose 0.3% month-over-month for two consecutive months, indicating that inflationary pressure is not solely from energy. Elections can change policy expectations but cannot directly lower holding costs.

Cross-market risks also need to be factored in. The Bank of Japan adjusted its policy rate target to approximately 1.25% in September, and a rapid appreciation of the yen could trigger unwinding of carry trades and cross-market deleveraging. There are two more macro hurdles before voting day: the Federal Reserve's FOMC meeting on October 27–28, followed immediately by the Bank of Japan's meeting on October 29–30. If both sides adopt more hawkish policies than expected, deleveraging pressure could overshadow political themes.

Different Seat Combinations Will Bring Different Policy Pricing

To discuss the election's impact, one must first distinguish between institutions already in place and expectations yet to be fulfilled. The GENIUS Act was signed into law in July 2025; the market structure bill H.R.3633 failed to reach the threshold in a Senate procedural vote on September 15 with a tally of 49 to 50; the SEC's rule proposals and tokenized securities exemptions are advancing along a separate administrative path. Changes in congressional seats affect whether these policy tools can be used and how costly they are to advance. Even if one party controls both chambers, specific provisions will still form different voting coalitions.

If Republicans retain both chambers, the market may first trade on policy continuity and legislative restart, with infrastructure, custody, and tokenized assets gaining more attention; the downside risk comes from macro, as fiscal expansion or expectations of increased Treasury supply could push up the dollar and yields, offsetting industry positives. A divided Congress means higher negotiation and oversight costs, and price reactions are more likely to be negative first and then divergent: risk premiums rise for projects reliant on rapid legislative progress, while platforms with clear business boundaries and well-defined revenue are relatively stable. If Democrats win both chambers, the weight of regulatory oversight will increase, but institutions already enacted into law will not become invalid; if stricter disclosure and asset segregation can enhance institutional trust, some compliant operators may actually benefit.

The election's impact on various asset classes will diverge

HTX Research defines the current state as a "capital screening period": capital is more willing to concentrate in a small number of assets with good liquidity, clear business models, or explicit catalysts, and is unwilling to bear the risk of the entire altcoin market.

BTC is the first-layer asset for observing macro risk appetite and institutional capital. When the dollar and real financing costs stabilize and net ETF demand recovers, it may benefit first; precisely because it has the best liquidity, it may also be sold first when risk budgets are cut. To judge the quality of the market move, watch whether BTC's decline narrows when negative news appears and whether gains are retained after positive news. ETH, by contrast, needs to prove the value of its additional risk exposure; over the same period, its spot ETF had net outflows on nine of ten trading days, and the idea that "ETH will naturally catch up after BTC rebounds" lacks sufficient basis.

The sensitivity of other assets to the election depends on their respective sources of value. High-performance public chains have greater growth elasticity but rely more on marginal risk budgets, and whether token unlock schedules can match the scale of capital inflows is key. Opportunities in DeFi lie in revenue quality and liability boundaries; policy clarity may lower barriers to institutional adoption but may also increase obligations for front ends and operators. In a high-interest-rate environment, growth in stablecoin and RWA businesses can be independent of token prices, and business expansion alongside declines in some governance tokens is not contradictory. Tokens with low float and high fully diluted valuations may rise quickly on small buying, yet struggle to accommodate exits of the same scale.

Whether the post-election rebound can continue depends on whether capital and interest rates can improve in tandem

The base case of the research report is selective repair amid high volatility: after the election result is clear, the market may see a round of risk re-engagement, but the repair will first concentrate in a small number of assets. Whether the rebound can escalate into a trend depends crucially on whether ETFs can shift from cumulative outflows to sustained inflows and whether the rate-hike path stops being revised upward. If inflationary pressure persists, cross-market financing tightens, and this overlaps with credit risk, expectations for a post-election rally need to be lowered. After voting ends, the test comes quickly: the U.S. Bureau of Labor Statistics will release the October employment report on November 6 and October CPI on November 10.

In its research report "The Hormuz Shock, US Midterm Elections, and Crypto Market Repricing" published in April this year, HTX Research listed the midterm elections as the second-tier important variable affecting the crypto industry. This article is a periodic update ahead of voting day. HTX Research will continue to track evidence changes under this framework around the two central bank meetings at the end of October and the voting and economic data releases in early November.

Note: The content of this article is not investment advice, nor does it constitute any offer, solicitation of an offer, or recommendation for any investment product.

About HTX Research

HTX Research is the dedicated research department under Huobi HTX, responsible for in-depth analysis of a wide range of fields including cryptocurrencies, blockchain technology, and emerging market trends, writing comprehensive reports, and providing professional assessments. HTX Research is committed to providing data-driven insights and strategic foresight, playing a key role in shaping industry views and supporting informed decision-making in the digital asset space. With rigorous research methodology and cutting-edge data analysis, HTX Research stays at the forefront of innovation, leading the development of industry thought, and promoting deeper understanding of evolving market dynamics. Visit us.