Research from IOSG Ventures says U.S. midterm elections have historically been followed by strong equity performance, but the same framework is much harder to apply cleanly to Bitcoin. The report finds that since 1950, the S&P 500 has been higher 12 months after all 19 midterm elections. Bitcoin, across the three full midterm cycles in its trading history, also finished higher one year later each time. Still, BTC fell in the weeks after Election Day in every one of those cycles, and IOSG says the data do not prove a standalone election effect.
Darko, the author of the note, wrote that the U.S. has held 19 midterm elections since 1950. Based on IOSG’s calculations, the S&P 500 stood above its Election Day level one year after every one of them. Bitcoin has only gone through three complete midterm cycles — 2014, 2018 and 2022 — and in each case the price was also higher a year later, though the path in between was uneven.
The S&P 500 has a strong post-midterm record, but 2026 starts from a different base
From 1950 through 2022, the S&P 500 posted gains in the 12 months after all 19 midterm elections. The average return was 15.1%, the median was 14.5%, and even the weakest case still produced a 1.1% gain. In non-midterm years, using early November as the same starting point, the average one-year return was 7.2%, and roughly 70% of observations were positive.
Most of the historical weakness came before the vote, not after it. In the year leading into midterm elections, the median maximum drawdown for the market was 16%. Within the six-month observation window centered on Election Day, 17 of the 19 elections saw the market low arrive before the vote.
The report also says rallies often begin before ballots are cast. Citing BlackRock analysis, it notes that U.S. equities have historically started rising around one month before midterm elections as the likely outcome becomes clearer. In late October this year, prediction markets were assigning about a 93% probability to Democrats controlling the House and about a 68% probability to Democrats controlling the Senate. That suggests a split between the presidency and Congress had already been widely expected and may not qualify as a surprise on Election Day itself.
That does not mean every policy implication has already been priced in. IOSG’s point is narrower: an expected result may trigger a smaller immediate market reaction than an unexpected one. In that sense, Nov. 3 is a useful reference point for tracking performance, but not necessarily the moment when the trend turns.
What makes 2026 different is the market’s starting position. In late October, the S&P 500 was only about 3% below its Oct. 6 record closing high, and the maximum drawdown over the prior year was about 9%. Put simply, there was not much lost ground left to recover.
IOSG identified five historical midterm elections that shared two features with the current setup: the market had risen more than 10% before the vote, and the drawdown was less than 10%. Those years were 1954, 1958, 1986, 2006 and 2014. The following 12-month returns ranged from 1.1% to 33.2%, with a median of 6.7%.
The report argues that the range matters more than the median. Those cases show that a strong market can keep rising after a midterm election, but they do not provide a dependable return target for 2027.
IOSG’s takeaway for equities is constructive, though conditional. History leans positive, but any further advance would still need support from corporate earnings and the rate backdrop.
Bitcoin was higher a year later in all three cycles, but the recovery path was rough
Bitcoin’s history is shorter, and the holding experience has been harder. In the three full midterm cycles that include BTC — 2014, 2018 and 2022 — the asset fell in the weeks after Election Day every time, yet traded above its Election Day level one year later in all three cases. In 2022, the post-election decline was shorter, and BTC was already up by the three-month mark.
The note cites Binance Research, which estimated Bitcoin’s average gain in the year after midterm elections at about 54%, broadly in line with IOSG’s own 53.8% average. But the path matters as much as the endpoint. The median return three months after the vote was about -31%, while the median 12-month return was about +45%. In other words, even investors who were right on the eventual recovery could still have faced meaningful losses before the rebound arrived.
IOSG says those observations cannot isolate the election itself as the driver. Each midterm election in Bitcoin’s history also happened roughly two to two and a half years after a halving, and each one landed during a bear-market phase. The Nov. 2026 election is also about two and a half years after the April 2024 halving.
With only three observations and two overlapping cycles, the report says there is no way to tell whether elections had a material effect on the pattern. It also warns against treating the median path as a price forecast. That curve combines outcomes from different years; it is not the full sequence any investor actually lived through in a single cycle. Applying it mechanically to current prices would create a false sense of precision that the data do not support.
The report adds that Bitcoin’s investor base has changed with the arrival of spot ETFs and corporate treasury demand. Those channels can add demand, but they can also transmit redemption pressure, financing stress and shifts in risk appetite into the market.
The practical point, according to IOSG, is simple: a constructive one-year view and the possibility of more short-term downside can both be true at the same time. History does not say when that downside ends.
For crypto, the clearest election channel runs through policy
IOSG says the most direct election impact on the crypto industry comes through policy. If markets broadly expect the presidency and Congress to be controlled by different parties, the more important question becomes how the next Congress handles legislation, oversight and appointments tied to regulatory agencies.
The report uses the CLARITY Act to illustrate that uncertainty. On Sept. 15, the Senate failed to pass a procedural motion to end debate and move the bill forward, with the vote split 49 in favor and 50 against. The Senate later filed a motion to reconsider, leaving the bill stalled rather than definitively dead. But because no second vote took place before the election recess, the only remaining window for the current Congress is the post-election lame-duck session before the next Congress is seated.
The next Congress will determine committee leadership, legislative priorities and the terms of any renewed negotiations. IOSG explicitly labels this section as scenario analysis, not a prediction of legislative outcomes.
Under the report’s framework, Republicans holding the Senate could be more favorable for policy proposals preferred by the industry, but that would not guarantee passage. A Democratic-controlled Congress, by the same logic, would not rule out bipartisan legislation either.
At the same time, regulators can still act within existing authority. Rulemaking and staff guidance may address some specific issues, though the report says their scope and durability may not match formal legislation.
The same election result can affect equities and crypto through different channels. If the presidency and Congress are split, new fiscal spending plans may face tighter constraints, which could ease some upward pressure on bond yields and support stock valuations. For crypto businesses, though, legislative gridlock could extend uncertainty around market-structure rules.
That opens the door to a divergence: financial markets may welcome limits on new spending, while the crypto industry may be disappointed by the lack of a stable legal framework. IOSG adds that neither outcome is automatic. Even in a gridlocked Congress, the executive branch and regulators could still move policy.
What could support markets into 2027
Darko’s base case is that the outlook for U.S. equities remains broadly constructive, though the advance is unlikely to be smooth, while Bitcoin’s short-term direction is harder to judge. The report is careful on this point: that view is informed by history, not mechanically derived from it.
For equities, continued earnings growth and some relief from bond-yield pressure would help sustain gains. A broader rally beyond the large technology names would also make the recovery look more convincing. On the other hand, persistently high inflation or weaker-than-expected earnings would weaken the bullish case regardless of which party controls Congress.
For Bitcoin, the report says the focus should be on whether spot ETFs can keep attracting inflows, whether liquidity improves, and whether BTC can hold earlier gains if the broader market weakens. If outflows persist or financing pressure rises again, IOSG says it would be premature to assume the bear-market low is already behind the market.
The note highlights three developments in particular:
- The Federal Reserve’s Dec. 8-9 meeting. IOSG says the Fed held rates at 3.75%-4.00% on Oct. 28, with two dissenting votes, and markets had begun to price in the possibility of a December hike. Updated economic projections could help show whether pressure from higher bond yields is easing.
- Earnings breadth and market breadth. The question is whether earnings growth and stock gains can spread beyond the companies currently leading the indexes.
- Bitcoin fund flows. Institutional demand needs to persist for several weeks rather than appear only on isolated trading days.
The report says election results should be read alongside those indicators, not used as a substitute for them.
History offers context, not a target
IOSG closes with two separate messages. For equities, the strongest historical pattern is the consistency of post-midterm gains, but the stock market was already strong before the 2026 vote. For Bitcoin, the lesson is different: all three full cycles ended with higher prices one year later, but each also included another leg down along the way. That helps frame holding risk, yet falls short of supporting a clear forecast for the next cycle.
The Nov. 3 election will shape the policy backdrop. Whether markets can extend the recovery into 2027, the report says, will still depend on what happens next in earnings, liquidity and capital flows.
Key references cited in the report
- BlackRock — historical views on the 2026 midterm elections and market performance
- Edward Jones — midterm elections and markets
- Binance Research weekly commentary
- U.S. Senate record for Sept. 15, 2026 and the CLARITY Act vote
- Federal Reserve FOMC calendar
- Polymarket balance-of-power market for the 2026 midterms
- Troutman Pepper Locke on agency action after the CLARITY Act setback
- IOSG calculations using Yahoo Finance S&P 500 daily closes (^GSPC, excluding dividends) and CoinMetrics BTC PriceUSD data
