Does Politics Save the Market?... Bitcoin, Gold, Stocks, The Real Bull Market is in 'This Structure'

▲ Bitcoin (BTC), Dollar (USD), US Election/AI Generated Image

An analysis has emerged suggesting that Bitcoin (Bitcoin, BTC), gold, and the stock market have shown stronger returns in a political structure where power is distributed, rather than under the complete control of a specific political party. This is interpreted as the market preferring a 'divided government' environment where policy uncertainty is limited, rather than a political monopoly.

According to Benzinga on May 14 (local time), crypto analyst Benjamin Cowen compared the performance of the S&P 500, Bitcoin, and gold by U.S. political power structure in a podcast released on May 13. Cowen analyzed that historically, markets have recorded the strongest returns under a divided government rather than under the complete control of either the Democratic or Republican parties.

A diagnosis was also presented that Bitcoin's median performance was weak during so-called political 'sweep' phases, where a specific party controls both the White House and Congress. Cowen explained that while there were strong exceptional upward cases like in 2017, overall, Bitcoin's median returns were relatively sluggish during periods of complete control by both Democrats and Republicans.

However, when looking only at average returns, the difference was clear. Bitcoin rose an average of 410% during periods when Republicans held power, while during Democratic administrations, it recorded an average return of -2% due to the significant decline during the Biden administration. However, Cowen noted that since average values can be influenced by some extreme upward and downward cases, he considered a divided government to be a more favorable environment for Bitcoin based on median values.

This year's trend is also far from the historical average. According to Cowen's analysis, Bitcoin has fallen by about 7% this year, which contrasts with the historical average return of a 65% increase in past midterm election years. This discrepancy suggests the possibility of greater volatility or deeper corrections if the macroeconomic environment deteriorates.

Regarding the stock market, it was evaluated that it has maintained an upward trend in the long term, regardless of changes in political power. Cowen explained that the S&P 500 has continued its upward trend over recent decades despite changes in presidents, congressional power, monetary policy, and economic cycles. He suggested that if Congress returns to a divided structure in 2027, it could be a favorable environment for Bitcoin based on past patterns, but added that Bitcoin's trading history is short, so the sample size is limited. Ultimately, the analysis concludes that long-term market structure and liquidity conditions are more critical variables than short-term political narratives.

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