Democrats Favored in Midterms, Bitcoin Is Mostly Watching the Fed
The Senate could delay the CLARITY Act again, but for Bitcoin, Fed rates and monetary policy seem to matter more for now.
Key Takeaways
- Democrats appear to be winning the U.S. midterms, but for Bitcoin, the Federal Reserve currently matters more than the political outcome.
- The Senate is crucial for the CLARITY Act, which is supposed to decide which regulator oversees which tokens.
- Bitcoin reacted to rate hikes and failed legislation, while the crypto sector is putting $30 million into political influence through Fairshake.
Democrats appear to be on track to win the U.S. midterms on November 3, but for Bitcoin, the political outcome may be less important than many crypto investors think. Traders on prediction market Polymarket gave Democrats a 61% chance of winning both chambers on September 28. Still, the recent price action suggests the market is mainly watching the Federal Reserve.
The Senate Remains the Key
The real tension is in the Senate. On September 15, it blocked the Digital Asset Market Clarity, or CLARITY, Act. That bill is meant to make clear which regulator oversees which tokens.
Senator Elizabeth Warren plays a major role in that. As the top Democrat on the Senate Banking Committee, she would normally help shape the agenda. That makes a Democratic majority in the Senate more important than just winning the House of Representatives.
What stands out, though, is that no Democrat voted for the bill, even after the sponsors made 126 changes at the party's request. Another attempt to get the CLARITY Act moving again would still require concessions from Republicans on ethics and stablecoin yield.
Bitcoin Is Watching Rates
Bitcoin rose after the rate hike and the failed vote, which suggests Congress is not the main driver of the price right now. The reaction after the Fed hike had already shown that rate expectations and ETF flows can matter more than political headwinds. The Fed raised rates on September 16 to a range of 3.75% to 4.00%. According to CNBC, 16 of the 18 policymakers expect another hike later this year.
That makes monetary policy more important than legislation for now. If Bitcoin's price holds onto its recent gains, that could suggest buyers are brushing off higher rates for the moment. If the price falls back, it could show that the Fed matters more than the political outcome in Washington.
The history of U.S. midterm elections also shows that Bitcoin often moves a lot in those years. In the past, the coin has on average fallen sharply in midterm years, while the following 12 months have often brought a recovery. For European crypto followers, that is especially relevant because it shows how sensitive Bitcoin still is to U.S. politics, even when the immediate price reaction is not always big.
What This Means for Crypto
For the broader crypto market, this is mainly a sign that regulation and rates keep crossing paths. In March, the SEC and the CFTC again called Bitcoin a digital commodity, but a future commission could reverse that interpretation. That makes Bitcoin's legal status less vulnerable than that of many other tokens, but not fully locked in.
At the same time, the sector is trying to influence the outcome. Fairshake, a crypto PAC, launched a $30 million (€26.4 million) ad campaign aimed at Sherrod Brown's Senate race in Ohio. That makes it clear that crypto in Washington is not just a topic of debate, but also an active player in political influence.
