The 2026 US midterm elections are increasingly seen as a potential catalyst linked to liquidity cycles and a broader crypto market recovery.
The US midterm elections, scheduled for the fourth quarter of 2026, are increasingly discussed as a potential macro catalyst for financial markets.
This also applies to crypto, amid expectations of changing liquidity conditions.
Asset prices, not politics
According to a macro thesis from market participant ‘Egrag Crypto’, early signals from the betting markets point to relative Republican weakness, which could increase incentives for market-friendly economic conditions ahead of the election.
The framework contours a three-phase timeline starting with a broader market correction in early 2026, during which criticism of Federal Reserve Chairman Jerome Powell is expected to increase.
This will be followed in mid-2026 by pressure for a change in monetary policy, which could potentially result in an easing of liquidity as policymakers respond to economic and political constraints. In this scenario, markets could enter a recovery phase in the second half of 2026, in line with the election period.
The thesis argues that rising asset prices tend to improve public sentiment quickly, supported by factors such as dividend income, potential tax relief for small businesses and broader ‘feel-good’ economic conditions. They further suggest that the Federal Reserve often becomes the focus of blame during recessions, which in turn allows political narratives to shift as liquidity conditions improve.
As such, this view reinforces the idea that market structure and liquidity trends can play a leading role in shaping political outcomes, rather than political developments acting as the main driver of markets.
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“Structure first. Politics later. Markets always lead.”
Looking back at 2024
In 2024, the cryptocurrency market experienced significant price increases following Donald Trump’s election victory. Bitcoin soared to record highs on investor optimism about a potentially more crypto-friendly regulatory environment and pro-crypto lawmakers in Congress.
However, by early 2026, much of the post-election upside had disappeared. Bitcoin, for example, retreated towards $60,000, and broader crypto sentiment cooled under macroeconomic pressure and waning Trump-induced euphoria.
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