Early-Warning Signals of Political Risk in Stablecoin Markets: Human and Algorithmic Behavior Around the 2024 U.S. Election

TL;DR

This study reveals that human-driven stablecoin transactions serve as early-warning signals of political stress during the 2024 U.S. election, with shifts occurring before exchange and algorithmic activity changes.

Contribution

It distinguishes human and algorithmic behaviors in stablecoin markets and demonstrates that human-driven flows predict political risk events earlier than other market indicators.

Findings

Human-driven stablecoin transactions shifted two days before the election.

Exchange trading volumes reacted only on Election Day.

Algorithmic activity changed significantly only in January 2025.

Abstract

We study how the 2024 U.S. presidential election, viewed as a major political risk event, affected cryptocurrency markets by distinguishing human-driven peer-to-peer stablecoin transactions from automated algorithmic activity. Using structural break analysis, we find that human-driven Ethereum Request for Comment 20 (ERC-20) transactions shifted on November 3, two days before the election, while exchange trading volumes reacted only on Election Day. Automated smart-contract activity adjusted much later, with structural breaks appearing in January 2025. We validate these shifts using surrogate-based robustness tests. Complementary energy-spectrum analysis of Bitcoin and Ethereum identifies pronounced post-election turbulence, and a structural vector autoregression confirms a regime shift in stablecoin dynamics. Overall, human-driven stablecoin flows act as early-warning indicators of political stress, preceding both exchange behavior and algorithmic responses.