Crypto Investors Exercise Caution Amid Volatility and Liquidity Concerns With Upcoming FOMC Meeting and US Elections

A pivotal week lies ahead with major political events such as the US election outcomes and the anticipated Fed Rate reduction. The electoral competition is intensifying between Donald Trump and Kamala Harris, prompting crypto traders to exercise caution pending the definitive results. Bitcoin (BTC) has remained below the $70,000 threshold, and altcoins have endured more substantial selling pressure this past weekend. Accordingly, the crypto market is steeling itself for potential swings in volatility and liquidity challenges.

Market Anticipates Turbulence Due to Upcoming FOMC and US Elections

Bitcoin (BTC) concluded October beneath the significant $70,000 resistance, falling short of establishing new record highs. In anticipation of the upcoming Federal Open Market Committee (FOMC) meeting and the US election verdicts, altcoins also confronted intense sell-offs, with traders erring on the side of caution.

The Federal Reserve will disclose its next monetary policy decision this Thursday, November 7. Based on the CME Group forecasts, there’s an overwhelming 99.7% chance of a rate reduction by 25 basis points. Meanwhile, the US Election is set to begin on November 5, with expected results by November 6, which could heavily influence financial and crypto markets alike.

Key Events This Week:

1. U.S. Presidential Election – Tuesday

2. ISM Non-Manufacturing PMI data – Tuesday

3. Initial Jobless Claims data – Thursday

4. Fed Interest Rate Decision – Thursday

5. MI Consumer Sentiment data – Friday

6. ~15% of S&P 500 companies report earnings…

— The Kobeissi Letter (@KobeissiLetter) November 3, 2024

With recent crypto market fluctuations heavily influenced by US politics and macroeconomic factors, it is expected to continue paralleling the trajectory of the S&P 500.

According to The Kobeissi Letter, there are historical precedents suggesting subdued S&P 500 returns whenever it looks probable that the incumbent party, currently the Democrats, may suffer a defeat. Over the past year, the S&P 500 has experienced one of its strongest surges on record with a 40% increase, hinting at market sentiments tilting towards a Republican victory.

Moreover, the market volatility tends to spike both prior to and following an election whenever the incumbent party concedes. The volatility index (VIX) has been reflecting this tension consistently throughout 2024, increasing 65% year-to-date, and this pattern of volatility is expected to spill over into the crypto market amidst the US elections.

The newsletter also pointed out:

“Regardless of a Republican or Democrat win, markets have historically averaged a POSITIVE return in election years. Since 1928, the S&P 500 has reported an average gain of +11.3% in such years, with 19 out of 23 years (83%) showing positive outcomes.”

Could Bitcoin (BTC) Be Gearing Up for a Massive Surge?

As the crypto market braces for heightened volatility during the week with the much-anticipated FOMC session and US election, some analysts remain optimistic about the market’s endurance.

Market patterns suggest that significant bull runs often occur post-elections, and Bitcoin (BTC) could be aligning for its next growth phase. There is anticipation that Bitcoin’s climb could extend, potentially reaching the $100,000 milestone by the end of the year. Should the BTC trajectory mirror its performance across the past two cycles, a parabolic leap to $200,000 and beyond could be on the horizon.

Learning from being bullish shows that history repeats itself. #Bitcoin dips before elections, but what follows is what matters… pic.twitter.com/jZxrvqWxhE

— Scottie Pippen (@ScottiePippen) November 3, 2024

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and connoisseur of financial markets with a passion for blockchain technology and cryptocurrencies. Committed to ongoing education, Bhushan thrives on sharing knowledge and enjoys investigating economic and financial developments. Reading thriller novels and experimenting with cooking are among his leisure pursuits.

Disclaimer: The presented content reflects personal opinions and should be considered as a reference only. Perform your own research before executing any cryptocurrency investments. Neither the author nor the publication assumes any liability for personal financial loss.