Bitcoin, Nasdaq Tumble as Democrats Take Control of Congress

Bitcoin down 6% and Nasdaq off 5.5%

Relief rally after election reverses within a day

Bitcoin and the Nasdaq, both of which rebounded after the U.S. midterm elections, plunged a day later. Concern that Democratic control of Congress could tighten regulation of artificial intelligence data centers hammered technology shares. Selling by investors cutting risk spread into the crypto market, while forced liquidations of bullish bets added to the slide.

On Nov. 5, Bitcoin was trading around $75,400 on Binance's USDT market, down about 6.3% from a day earlier. It fell as low as $75,208 during the session. That was about 6.3% below the previous close of $80,504.01.

The Nasdaq Composite closed down 1,421.52 points, or 5.52%, at 24,315.00 in New York that day. The S&P 500 and the Dow Jones Industrial Average also fell 4.36% and 3.44%, respectively. The Nasdaq is now about 12% below the record high it reached last month.

A day earlier, the Nasdaq rose 1.4% on expectations that political uncertainty would ease after Democrats secured both the House and Senate. Bitcoin also reclaimed $80,000 on the same logic. But buying faded as investors focused on policy changes under the new Congress and state governments.

Victories by Democratic politicians opposed to data-center construction stirred anxiety over AI investment. Delays to construction schedules could disrupt demand for semiconductors, servers and power equipment. That added regulatory pressure to a market already questioning whether massive AI spending would generate sufficient returns.

As investors cut exposure across risk assets, selling pressure spilled into Bitcoin. Bitcoin miners that had been expanding their data-center businesses also fell on concern that AI investment could slow. Policy changes after the election appeared to pressure technology shares and crypto markets at the same time.

Investor sentiment also remained under pressure from last week's $6.3 billion Binance hack. Uncertainty over how measures including the Clarity Act, which would set the regulatory framework for the crypto market, might be handled under a Democrat-led Congress also curbed buying.

Bitcoin's sharp drop triggered a wave of forced liquidations in derivatives markets. More than $1 billion in crypto derivatives positions were liquidated over 24 hours, according to CoinGlass data. Most were leveraged long positions betting on further gains. As collateral values fell, positions were forcibly unwound, and the additional selling widened losses.

"The impact of a slowdown in data-center construction is becoming more concrete, and fresh selling is coming into the market," Joshua Lim, FalconX's global co-head of markets, said. He added that much of the previous day's rebound had been driven by short covering from investors who had been betting on lower prices.