Bitcoin is back above $80,000, US stocks have rallied sharply, and oil prices have fallen following the US midterm elections. But why are markets recovering when Republicans have lost control of CongrBitcoin is back above $80,000, US stocks have rallied sharply, and oil prices have fallen following the US midterm elections. But why are markets recovering when Republicans have lost control of Congr

Bitcoin Reclaims $80,000 After Republican Midterm Defeat: What Is the Market Betting On?

#Industry Perspectives

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Author: Van Dat Phan

2026/11/10 08:38

The market appears to be betting that the election setback will put more pressure on the Trump administration to de-escalate the conflict with Iran. Lower oil prices could ease inflationary pressure, reduce the need for further monetary tightening, and create a more supportive environment for risk assets.

Key Takeaways

Markets are rallying primarily on expectations of a de-escalation in the Iran war, which could bring down oil prices and reduce pressure for further rate hikes.
Bitcoin's latest bounce still looks more like a technical rebound than a confirmed trend reversal, with ETFs seeing net outflows and leverage on the rise.
Slower progress on crypto regulation and more than $3 billion still held in wallets linked to the Binance hackers remain major headwinds for the market.
Investors should closely monitor upcoming news and macroeconomic developments to assess where the market could head next.

1. Why Did Markets Rally Immediately After the Republican Defeat?

As election results came in, Bitcoin fell below $76,000, its lowest level in seven weeks, while S&P 500 futures dropped to a three-month low. According to AP and NBC News, Democrats won control of both the House of Representatives and the Senate. However, Trump remains the sitting president and retains his veto power.

Shortly afterward, stocks, crypto, and gold all moved higher, while oil prices fell sharply.

The first explanation is that election uncertainty has finally cleared. Polymarket had already priced in a greater than 75% probability of a Democratic victory, suggesting that the overnight sell-off was driven more by uncertainty than by the outcome itself. That explanation makes sense, but it only scratches the surface.

Just hours after the results, Vice President JD Vance wrote on X, "The reason we lost is the war." He cited a pollster who said voters who backed Trump in 2024 but switched to Democrats in 2026 were focused on ending the war, the cost of living, America First, and US relations with Israel. Trump took a more cautious view, describing the war as just one of several reasons for the defeat while maintaining that he had made the right decisions.

The war, which began on February 28, has driven gasoline and diesel prices sharply higher. Brent crude approached $118 on October 30 amid fears that the conflict could escalate after the election. Following the Republican defeat, however, markets began pricing in the possibility of a new US-Iran agreement. With Trump saying there were no plans for an immediate strike, part of the geopolitical risk premium was quickly unwound.

How the Impact Flows Through Markets: From Oil Prices to Bitcoin

War affects oil: As fears of further escalation fade, oil prices fall, with Brent dropping below $95.

Oil affects inflation: Cheaper energy helps relieve price pressures. US headline CPI rose 3.7% in September, while core CPI, which excludes food and energy, increased by only 2.6%.

Inflation affects the Fed: The Federal Reserve raised rates in September and held them steady in October. If inflation cools, the Fed will have fewer reasons to deliver additional hikes.

The Fed affects Bitcoin: As concerns about further rate increases ease, US Treasury yields and the dollar fall, potentially encouraging capital to rotate back into equities and crypto.

However, three distinctions are important:

The Fed has not cut rates. Markets still expect at least one more hike. What has changed is the possibility that pressure for additional tightening may ease.
Falling oil prices do not automatically create more liquidity. Brent remains roughly 56% above its level at the start of the year, while tariffs could continue pushing up goods prices.
The reason oil is falling matters. A decline driven by reduced fears of supply disruptions is positive for risk sentiment. But if oil falls because demand is weakening, markets could shift their attention to recession risks.

2. Oil, Gold, and the War: Three Scenarios That Could Shape the Market

The election defeat has increased political pressure on Trump, but it does not guarantee a de-escalation. Reports suggest that he is considering several options, including airstrikes, a negotiated agreement, or continued economic pressure. Meanwhile, Vice President JD Vance favors negotiations, while the CIA director and Treasury secretary reportedly want to maintain the blockade.

Qatar is pushing for dialogue, but Iran's demands to end the blockade, ease sanctions, and release frozen assets remain major obstacles. A memorandum dated June 17 collapsed after just three weeks, underscoring that reaching an agreement and successfully implementing it are two very different things.

Another important point is that the new Congress will not take office until January, so any additional political pressure will take time to materialize. There is also a historical precedent worth remembering: George W. Bush increased US troop levels in Iraq after the Republican midterm defeat in 2006. Voter dissatisfaction does not necessarily translate into military de-escalation.

Three scenarios could unfold:

Negotiations stall: Oil trades on headlines, while gold and Bitcoin struggle to establish a clear trend as the interest-rate outlook remains uncertain.

An agreement is reached: Oil could decline further, easing inflationary pressure. Gold and Bitcoin may have room to rally if Treasury yields and the US dollar both move lower.

The conflict escalates: Oil could surge, putting pressure on Bitcoin. Gold may benefit from safe-haven demand, although it could still fall if yields and the dollar rise sharply.

Oil: Traffic through the Strait of Hormuz has returned close to pre-war levels, while JPMorgan's estimates of an oil surplus have helped ease concerns about shortages. However, commercial inventories are near 15-year lows, leaving a thin buffer against future disruptions. If Brent moves back above $100, investors should compare that move with shipping flows and freight costs to determine whether genuine supply risks are returning.

Gold: Its decline of more than 20% since the war began shows that interest-rate pressure can outweigh safe-haven demand. A diplomatic breakthrough could support both gold and Bitcoin if yields and the dollar decline together. Still, gold is also sensitive to real yields, while Bitcoin needs genuine spot buying to sustain a recovery.

3. Two Crypto-Specific Headwinds: Regulation and the Binance Hacker Funds

Regulation: Delayed Progress, Not Immediate Crackdowns

The argument that "crypto only rises because of liquidity, not regulation" is too simplistic. When the CLARITY Act failed in the Senate on September 15, Bitcoin fell 3%, while Coinbase and Circle shares posted even steeper declines, although the broader market also sold off.

Kalshi currently puts the probability of a market structure bill becoming law before 2027 at just 6%. Elizabeth Warren is expected to lead the Senate Banking Committee, while House Democrats are reportedly discussing a bill that would give the SEC a larger role. However, the new Congress will not take office until January, and Trump still holds veto power. The more likely outcome, therefore, is a continued legislative stalemate rather than an immediate agreement. Companies awaiting regulatory approval, DeFi projects, and US-linked altcoins are likely to be the most exposed.

Binance Hack: A Risk Overshadowed by the Election Narrative

Following the October 29 hack, Bitcoin dropped about 4%, while ETFs recorded more than $1 billion in net outflows over the next three trading sessions. Bitcoin had been trading around $79,500 before the incident, meaning the current rebound has only brought the price back close to its pre-hack level.

According to reports, of the more than $6 billion stolen, nearly $3 billion has been frozen or seized. More than $3 billion remains in associated wallets, primarily in ETH and BTC. Almost none of the funds has been meaningfully cashed out. The current flow of funds suggests that other assets are being converted into BTC. The earlier Bybit hack offers a useful precedent: the stolen ETH was laundered within ten days, but cashing out the proceeds took months.

For Bitcoin: More than 18,000 stolen BTC remains unmoved. If sold evenly over three months, that would amount to only around 200 BTC per day. The bigger risk may be the market reaction when those wallets start moving funds.
For Ethereum: Most of the stolen ETH is still concentrated in a handful of large addresses and has not moved since October 30. If those holdings are gradually converted into BTC as anticipated, the ETH/BTC pair could come under pressure.
For market confidence: Binance says it has compensated users for approximately 98% of affected assets. Its October 31 Proof of Reserves also showed that its ten major tokens were backed at a ratio of at least 1:1.

4. Bitcoin: The Start of a New Trend or Just a Technical Rebound?

Current data suggests that the recovery is still largely technical. Futures open interest has climbed to its highest level in more than a month, pointing to increased leverage rather than a clear pickup in spot demand. Short liquidations have also been significant, meaning part of the rally has been fueled by position closures rather than fresh buying.

One encouraging sign is that funding rates have cooled since election night. On-chain data also shows that much of the supply held by short-term Bitcoin holders remains underwater. A more meaningful recovery in confidence would emerge when these investors move back into profit.

Historical patterns also argue against chasing the rally. The S&P 500 rose following all 11 US midterm elections between 1982 and 2022. However, according to Glassnode, Bitcoin experienced additional declines of 15% to 50% after the three most recent midterm elections. A sample of just three cycles is far too small to draw a firm conclusion, but it is enough to justify caution.

The base case is for Bitcoin to trade between $76,000 and $85,500 through the end of November. A bullish trend would become more convincing only if BTC secures a daily close above $85,500, ETFs record net inflows across multiple sessions, and short-term holders move back into profit.

Investors should also keep an eye on the following upcoming macroeconomic events:

Conclusion

Bitcoin's return above $80,000 reflects expectations of a de-escalation in the conflict and reduced pressure for further interest-rate hikes. However, it is not enough to confirm the beginning of a new bull trend. For the recovery to become sustainable, markets need tangible progress in negotiations, more stable oil prices, and a return to consistent ETF net inflows.

Looking ahead, the war, inflation data, and the Fed's response will continue to drive broader market direction. For crypto, regulatory uncertainty and activity in hacker-linked wallets remain additional headwinds. The key question is whether improving expectations will translate into sustained buying demand or merely fuel another short-lived relief rally.

Disclaimer: This content does not constitute investment, tax, legal, financial, or accounting advice. MEXC Blog provides this information for educational purposes only. Always do your own research, understand the risks, and invest responsibly.

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