In brief
- Bitcoin slid toward $76,000, erasing Wednesday's breakout, as roughly $428 million in crypto longs were liquidated within an hour.
- The Nasdaq approached correction territory as chipmakers and data-center firms fell on concerns over AI spending and Democratic oversight.
- Wednesday's rally included a massive short squeeze, with futures data pointing to repositioning rather than a comparable influx of new buyers.
Bitcoin erased Wednesday's post-election rebound Thursday as a technology stock selloff spread to cryptocurrencies, triggering hundreds of millions in forced liquidations.
Bitcoin fell to about $76,500, down nearly 5% and back near levels seen before Wednesday's jump above $80,000. Ethereum shed more than 5%, while other major tokens suffered comparable losses. Roughly 90% of the top 100 cryptocurrencies were in the red during the selloff, while roughly $428 million in crypto longs were liquidated in one hour.
Wall Street offered no shelter. The S&P 500 lost about 2.6% in late-morning trading, while the Nasdaq sank nearly 4%, approaching a correction, or a 10% drop from its peak.
The election is part of the answer, but anxiety over AI spending and interest rates is making the damage worse.
The election rally meets the AI selloff
Democrats' sweep of Congress initially rattled investors expecting tougher oversight of industries favored by President Donald Trump. Stocks rallied Wednesday as traders bet gridlock would limit major policy changes and falling oil prices would ease inflation. Bitwise Europe analyst André Dragosch also told Decrypt the Democratic sweep was "largely priced in."
Thursday brought a different interpretation. Investors weighed what Democratic control might mean for the data-center boom, particularly in states where voters oppose rising electricity costs and new facilities.
And the new political configuration is already moving things. Voters in at least 29 U.S. jurisdictions backed restrictions on data-center development, although not every measure is binding. UBS estimates potential pauses could threaten 30% of planned U.S. data-center capacity additions in 2028, per Reuters.
"We suspect there is going to be some scrutiny on this aggressive AI buildout," Swissquote senior analyst Ipek Ozkardeskaya told Reuters.
→Chipmakers and AI infrastructure companies took the hit first. The Philadelphia Semiconductor Index dropped about 8%, while CoreWeave and Nebius fell by double digits. Tesla also tumbled roughly 9.5%, extending losses after Elon Musk spent heavily backing Republican candidates. Investors were also questioning the returns on massive AI investments.
The S&P 500 had the biggest bearish intraday movement in months, dropping almost 4% in 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 threatens crypto's ambitions in Washington. Democratic control complicates efforts to revive the stalled Clarity Act, a proposed federal rulebook for digital assets. The new Congress will not take office until January. Politics alone cannot explain Bitcoin losing thousands of dollars in an hour.
Why Bitcoin's rebound fell apart
Wednesday's rally looked dramatic, but much of its buying pressure came from traders closing losing bets against Bitcoin. About $378 million in short positions were liquidated in one hour as Bitcoin pushed above $80,000, according to CoinGlass data.
Today’s reversal flipped the liquidation machinery in the opposite direction. Exchanges automatically close underfunded longs as prices fall, generating more selling and the enormous red candles visible on Bitcoin's hourly chart.
Crypto was already vulnerable before the election. The market had lost roughly $300 billion in value over the previous month, amid concerns about AI spending, rising borrowing costs and the fallout from last week's multibillion-dollar Binance hack.
Traders also expect another Federal Reserve rate increase in December as inflation persists. Friday's October jobs report could alter those bets; higher rates generally hurt demand for speculative investments.
Technically, Bitcoin's still-forming daily candle is threatening a bearish engulfing pattern, potentially swallowing Wednesday's green body and erasing the breakout in a single session.
The hourly chart shows selling through $79,000 to near $76,100. The next test is $75,000, while reclaiming $80,000 could ease the pressure—but Thursday's candle has not closed, so the pattern remains unconfirmed.
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