Political endorsements have always had an impact on financial markets especially in recent years. For digital assets, the impact sends shock waves throughout the industry since it is not yet fully matured, as such, any potential policy change could have a ripple effect. For forex markets, investors on the outside are constantly looking to see what other global players are doing in their country to gauge how any policies could affect the country’s political powers or financial strength. Imagine for example you invest in a foreign currency and suddenly the country is at war with another country. The political stability of that country is at risk and as such you and all other investors will most likely pull out your investment just to be safe. How Political Endorsements Affect Cryptocurrency Prices Sentiments largely move cryptocurrency valuations, that is, attitudes or general feelings investors have toward an asset. For example, if investors are optimistic, they expect that prices will rise and so will valuation. This is a bullish sentiment. On the other hand, if they are pessimistic, they expect prices to fall, which usually means they dump their assets. This is a bearish sentiment. So when a politician endorses a cryptocurrency either through a public statement or with a policy proposal, it is like having the government’s backing, which often leads to a bullish sentiment. Similarly, if they criticize a digital asset, it triggers a massive sell-off. Meme coins, for example, owe their success largely to social media hype and political endorsements from people like Elon Musk. If Musk tweets about a meme coin, it could make it to the list of top meme coins in a matter of hours. According to Bitcoinist, the best meme coins to invest in right now include Catslap and Mind of Pepe. Perhaps the most popular endorsement in recent history came from the president of El Salvador in 2021 when he led the Bitcoin Law bill to be passed in the country. The bill made Bitcoin a legal tender, meaning it can be used to carry out formal transactions and has the government’s backing. The value of Bitcoin went from around $31,000 in June 2021 when the bill was passed to around $52,000 in September 2021 when it was officially adopted. This is the power of political endorsements on cryptocurrency valuation. How Political Endorsements Affect Forex Markets The forex market is mostly affected by interest rates and monetary policies. Political endorsements tend to only cause short-term price movements in exchange rates. For example, if a senator proposes a bill that strengthens trade deals that will lead to economic growth for the US, it will positively impact the position of the US dollar in forex markets. Conversely, the same applies if a policy is introduced that could weaken the local currency. If you look at a country like Nigeria, 10 years ago the exchange rate was about 1 USD = 204 NGN. However, due to the country’s monetary policies that have led to rising inflation, the Naira has weakened and today the average exchange rate is about 1,528 NGN to a dollar. Another case study to consider is the case of Brexit and the British Pound (GBP). When key government figures started endorsing the movement, it created a lot of uncertainty in the forex markets resulting in a sharp decline in GBP value. Again, it could be something as simple as feelings (sentiments) that could make a value go up or down.