Mid-Term Election Results Good News for Stocks, History Shows

What a week it was.

First, the mid-term elections failed to produce the “red wave” that most pollsters and pundits predicted. As I write this, the Democrats have maintained control of the Senate while it’s still unclear which party will have control of the House.

And second, the crypto industry may have experienced its very own Lehman Brothers moment.

FTX, until recently the world’s second-largest crypto exchange, filed for bankruptcy as its embattled founder, Sam Bankman-Fried, stepped down as CEO following a liquidity crunch that exposed the firm’s improper use of customer assets. FTX’s shocking demise comes within months of the collapse of Terra’s Luna coin, which triggered the bankruptcies of crypto firms Celsius Network, Voyager Digital and Three Arrows Capital.

The question on many investors’ minds is: How far and for how long will the contagion spread?

h2 Biggest Mid-Term Upset in Decades?/h2

It’s common knowledge that mid-term results have not always been kind to the incumbent president. President Barack Obama’s agenda was famously sidelined by a Tea Party “shellacking” in 2010, and Republicans lost control of Congress midway through President Donald Trump’s term.

It’s also a given that past performance does not guarantee future results. As former Secretary of the Treasury Larry Summers tweeted last Wednesday, the last Democratic president to have such a favorable mid-term outcome as Joe Biden did was John F. Kennedy, in 1962.

h2 Crypto Industry Needs Reasonable Regulation/h2

Returning to the issue of FTX, I think it’s important for people to understand that Sam Bankman-Fried, or SBF, was until recently seen as a smart, trustworthy wunderkind. Fortune magazine called him the “next Warren Buffett.” Last year, SBF said that FTX could one day buy Goldman Sachs (NYSE:GS) and the Chicago Mercantile Exchange (CME).

But as it did with Theranos’ Elizabeth Holmes (who just last week asked to be sentenced with an 18-month at-home confinement , life has come at SBF fast. The 30-year-old entrepreneur’s net worth evaporated from an estimated $16 billion to less than $1 billion — all within an unprecedented 24-hour period.

FTX and SBF’s unethical decisions will inevitably contribute to many people’s lack of trust in Bitcoin and provide fuel to its biggest critics, Senator Elizabeth Warren chief among them. I believe that for crypto (and Bitcoin specifically) to gain widespread adoption, level-headed law-makers need to pass reasonable, rational guardrails protecting users and investors from bad actors in the still nascent crypto industry.

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Written By: Frank Holmes