Dalio: The 2026 US midterm elections may overturn Trump's policies, and the crypto market faces a turning point

Billionaire hedge fund manager and founder of Bridgewater Associates Ray Dalio recently issued a stark warning, suggesting that the 2026 U.S. midterm elections could become a pivotal point for political power shifts, potentially reversing the current policies of the Trump administration, including the regulatory framework critical to the crypto industry.

01 The Economic Logic Behind Election Predictions

In his latest annual analysis, Dalio clearly states that the core contradiction facing the U.S. today is the inflation and housing affordability crisis. These issues primarily affect the bottom 60% of income earners, while the wealthiest 10%, holding large stock portfolios, are relatively unaffected.

This widening wealth gap and political polarization are likely to translate into votes in the upcoming elections.

Historically, Dalio believes that “due to the functioning of democratic systems, President Trump has had two years of unimpeded governing authority, but this mandate could be significantly weakened in the 2026 midterm elections and reversed in the 2028 presidential election.”

This analysis is based on the American political cycle, where the ruling party often loses seats in midterm elections.

02 Possible Reconfiguration of the Political Landscape

Currently, the Republican Party holds a narrow majority in the House of Representatives with just a 5-seat advantage. This fragile majority means that any policy misstep or voter dissatisfaction could quickly lead to a change in power.

According to data from the prediction market Polymarket, the probability of Democrats gaining control of the House in November 2026 is as high as 78%.

Analysis from investment bank TD Cowen also supports this view, suggesting that Democrats may delay key legislation votes, waiting for a power reshuffle after the midterms.

Once Democrats regain control of the House, the Trump administration’s policy agenda will face significant resistance, potentially leading to legislative gridlock.

03 Critical Time Window for the Crypto Industry

The crypto industry has been one of the main beneficiaries of the Trump administration’s tech-first policies. However, shifts in power balance could overturn the current pro-crypto regulatory stance before key legislation is signed into law.

Joe Dol, General Counsel of Magic Eden, pointed out in an interview in 2024, “President Trump, his administration, and legislators supporting cryptocurrencies have only two years to pass crypto regulations.”

Dalio’s forecast aligns closely with this analysis, jointly outlining a clear policy window.

04 Legislative Progress and Crypto Regulation Timeline

The CLARITY Act, as the first comprehensive legislation on the U.S. crypto market structure, is currently at a critical stage. The bill aims to clarify the regulatory responsibilities of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The bill was passed by the House in July 2025 but has stalled in the Senate. White House crypto advisor David Sacks previously stated that the Senate expects to hold hearings on the Market Structure Act in January 2026.

Sacks wrote on social media, “We are closer than ever to passing landmark crypto market structure legislation called for by President Trump. We look forward to completing this work in January!”

However, if Democrats win the midterm elections, the passage of the CLARITY Act could be delayed until 2027 or significantly amended.

05 Market Uncertainty Has Already Emerged

In addition to the CLARITY Act, several key dates in 2026 could influence U.S. crypto policy:

• May 15: Federal Reserve Chair Jerome Powell’s term ends; Trump may appoint a more dovish successor, potentially affecting interest rate policies;
• July 1: California’s Digital Financial Assets Law takes effect, requiring institutions engaging in business with California residents to obtain state licenses;
• November 3: U.S. midterm elections, which could fundamentally change the legislative environment for crypto policies.

These key milestones, combined with political uncertainty, could significantly increase market volatility in the second half of 2026.

06 Practical Impact on Crypto Investors

Political shifts often accompany capital flows and asset allocation adjustments. Dalio emphasizes that during periods of policy uncertainty, investors should seek diversification.

He pointed out that changes in currency value have a decisive impact on wealth transfer, noting that the dollar’s value relative to gold fell 39% in 2025.

As of January 7, 2026, mainstream cryptocurrencies listed on Gate reflect market cautiousness. Investors are weighing the limited window for pro-crypto regulation against potential political changes.

This environment could lead to two possible investment scenarios:

• If Republicans hold the House, the pro-crypto policy window could extend until 2028;
• If Democrats gain a majority, policy uncertainty in late 2026 could trigger market turbulence.

07 How Investors Can Address Political Cycle Risks

For crypto investors, Dalio’s analysis provides an important framework:

Closely monitor economic indicators, especially inflation and housing affordability data, which could directly influence voter sentiment and election outcomes.

Diversify investment portfolios, not only across different types of crypto assets but also geographically, allocating some assets to jurisdictions with more stable policy environments.

Maintain flexibility and be prepared to adjust investment strategies based on election results and policy changes. Short-term policy risks may create market opportunities, but long-term structural shifts should also be considered.

08 Structural Trends in the Crypto Market

Beyond the midterm elections, the U.S. crypto market is also facing structural changes. Since Trump took office, the U.S. has experienced a “crypto policy revolution.”

The government has ceased investigations into crypto companies, making it easier for banks to hold crypto assets, and enabling asset management firms to more easily launch crypto-related ETFs. Legislators have passed landmark legislation on stablecoins and made significant progress on market structure legislation.

However, these advances may face risks from political turnover. Fireblocks Policy Director Cia Markova pointed out that if the passage of market structure legislation is too close to the midterm elections, “the overall risk of the bill being shelved will significantly increase.”

Future Outlook

The past year’s crypto policy revolution in the U.S. will face a test in the midterm elections. CEO of the Blockchain Association, Sommer Musinger, noted that the focus will shift from legislation to implementation.

Polymarket’s forecast shows a 78% chance that Democrats will win control of the House in November. Behind this data, crypto investors are reassessing the long-term attractiveness of the U.S. market.

Gold, valued in USD, achieved a 65% return in 2025, outperforming the S&P 500’s 18%. This is not only a difference in asset performance but also a vote of no confidence in the political and monetary systems.