Bitcoin’s post-election rebound evaporated Thursday as a selloff in technology stocks spilled over into cryptocurrencies, triggering hundreds of millions of dollars in forced liquidations.
The flagship cryptocurrency fell to approximately $76,500, down nearly 5% and back near levels seen before Wednesday’s surge above $80,000. Ethereum saw a decline of more than 5%, with other major tokens experiencing comparable losses. Roughly 90% of the top 100 cryptocurrencies were trading in the red during the selloff, while about $428 million in crypto long positions were liquidated within a single hour.
Wall Street offered little refuge. The S&P 500 lost about 2.6% in late-morning trading, while the Nasdaq plunged nearly 4%, approaching a correction—a 10% drop from its recent peak.
Political Uncertainty Fuels Market Downturn
While the recent election is a contributing factor, growing anxiety over artificial intelligence spending and interest rates is exacerbating the market’s woes.
Initially, the Democratic Party’s sweep of Congress rattled investors who had anticipated stricter oversight of industries favored by former President Donald Trump. Stocks rallied on Wednesday as traders bet that political gridlock would limit significant policy changes and that falling oil prices would help curb inflation. André Dragosch, an analyst at Bitwise Europe, had told Decrypt that the Democratic victory was “largely priced in.”
However, Thursday brought a different interpretation. Investors began to weigh the implications of Democratic control for the booming data center industry, particularly in states where voters have expressed opposition to rising electricity costs and new facility development.
The evolving political landscape is already having an impact. Voters in at least 29 U.S. jurisdictions supported restrictions on data center development, though not all of these measures are legally binding. UBS estimates that potential pauses could jeopardize 30% of planned U.S. data center capacity additions by 2028, according to Reuters.
“We suspect there is going to be some scrutiny on this aggressive AI buildout,” Ipek Ozkardeskaya, a senior analyst at Swissquote, told Reuters.
Tech and Crypto Hit Hard
Chipmakers and companies involved in AI infrastructure were the first to bear the brunt of the selloff. The Philadelphia Semiconductor Index dropped about 8%, while companies like CoreWeave and Nebius saw double-digit declines. Tesla also tumbled roughly 9.5%, extending its losses after Elon Musk heavily backed Republican candidates. Investors are also questioning the returns on massive AI investments.
The S&P 500 experienced its most significant bearish intraday movement in months, dropping almost 4% in a matter of minutes.
“The market’s moving from the promise of AI to the price of AI,” Ted Parkhill, chief executive of Incline Investment Management, told Reuters.
The political shift also casts a shadow over cryptocurrency’s ambitions in Washington. Democratic control complicates efforts to revive the stalled Clarity Act, a proposed federal regulatory framework for digital assets. The new Congress is not scheduled to take office until January. However, politics alone cannot fully explain Bitcoin’s sharp decline of thousands of dollars within an hour.
Liquidation Cascade Reverses Gains
Wednesday’s rally appeared dramatic, but much of its buying pressure stemmed from traders closing out losing bets against Bitcoin. Approximately $378 million in short positions were liquidated in one hour as Bitcoin pushed above $80,000, according to data from CoinGlass.
Thursday’s reversal flipped the liquidation machinery in the opposite direction. As prices fell, exchanges automatically closed underfunded long positions, generating further selling pressure and contributing to the significant red candles visible on Bitcoin’s hourly chart.
Cryptocurrencies were already in a vulnerable position before the election. The market had lost roughly $300 billion in value over the preceding month, amid concerns about AI spending, rising borrowing costs, and the fallout from last week’s multi-billion dollar hack of the Binance exchange.
Traders also anticipate another Federal Reserve interest rate hike in December as inflation persists. Friday’s October jobs report could influence these expectations; higher interest rates generally dampen demand for speculative investments.
Technically, Bitcoin’s daily candle, which is still forming, is threatening a bearish engulfing pattern. This could potentially erase Wednesday’s gains and negate the breakout in a single trading session.
The hourly chart indicates selling pressure through $79,000 down to near $76,100. The next key support level to watch is $75,000, while reclaiming $80,000 could alleviate some of the selling pressure. However, Thursday’s candle has not yet closed, meaning the pattern remains unconfirmed.
