Bitcoin at one point fell nearly 6%, breaking through the $76,000 mark as a wave of sell-offs in technology stocks spilled over into the cryptocurrency market, triggering a wave of leveraged position liquidations.
Bitcoin prices continued their downward trend on November 5th, falling to a seven-week low, as the sell-off in the US stock market spread to riskier assets, exacerbating the pessimistic sentiment already gripping the cryptocurrency market.
According to Bloomberg , the world's largest cryptocurrency at one point fell by as much as 5.8%, dropping below $76,000 . Ethereum, the second-largest cryptocurrency by market capitalization, also lost approximately 8% of its value.
The global financial markets are in turmoil.
The sell-off occurred as the Nasdaq 100 index plunged 6.4%, led by chip manufacturing stocks. Selling pressure intensified after several technology companies issued less optimistic business outlooks, while investors worried that Democratic control of the US Congress could lead to stricter oversight of the artificial intelligence ( AI ) industry.
The cryptocurrency market was already under pressure from internal issues, particularly the aftermath of the Binance cyberattack and declining interest from individual investors. The volatile tech stock market further fueled investor caution, despite falling US Treasury yields – a factor that would normally support speculative assets.
Vetle Lunde, research director at K33, believes that Bitcoin's decline is closely linked to the wave of sell-offs in technology stocks.
According to this expert, this is a highly correlated market fluctuation, most likely stemming from investors' reactions to the results of the US midterm elections. Financial markets in general are experiencing particularly strong volatility as investors try to assess the impact of a scenario where the Democratic Party gains control of both houses of Congress .
The value of each Bitcoin dropped by more than $4,000 in just a few hours. Photo: CoinMarketCap.
Not only cryptocurrencies, but also the stocks of companies operating in this sector have plummeted.
During trading on November 5th, shares of Bitcoin mining and AI data center operators such as CleanSpark, Cipher Digital, and MARA Holdings all fell by more than 14%. Meanwhile, the two digital asset trading platforms Coinbase Global and Robinhood Markets both lost approximately 10% of their market value.
James Butterfill, research director at CoinShares, argues that Bitcoin mining companies' expansion into AI infrastructure has made their business prospects increasingly tied to the technology sector, while also increasing their vulnerability to market reversals.
According to him, Bitcoin and Ether are being caught up in a widespread sell-off of technology stocks. Concerns about the political situation, leveraged financial activities, and fundraising in the AI ​​sector are spilling over into the cryptocurrency market.
Although Bitcoin itself is not dependent on the business results of technology companies, investors often sell these assets simultaneously when they want to reduce their risk tolerance. Liquidation of leveraged positions further amplifies the downward trend.
Investors withdraw $1 billion from Bitcoin ETFs.
Selling pressure in the cryptocurrency market is also evident in the outflow of capital from spot Bitcoin exchange-traded funds (ETFs) in the US.
According to data compiled by Bloomberg , in the days following the Binance cyberattack until November 4th, spot Bitcoin ETFs recorded net outflows of approximately $1 billion .
Notably, the iShares Bitcoin Trust (IBIT) managed by BlackRock faced the greatest pressure, with approximately $900 million withdrawn during this period, equivalent to 90% of the group's total net outflows.
This development reflects a significant shift in the sentiment of institutional investors, who previously played a crucial role in driving demand for Bitcoin through ETF products.
Meanwhile, data from Glassnode shows that the profitability of short-term Bitcoin investors is also rapidly deteriorating.
Just about a month ago, almost all of the Bitcoin held by short-term investors was profitable. This group of investors bought Bitcoin within the last 155 days.
However, following the recent sharp correction, the percentage of Bitcoin holdings that were profitable within this group has dropped significantly.
In a report published this week, Glassnode analysts stated that the majority of Bitcoin held by short-term investors has now resulted in losses.
Michael O'Rourke, Director of Market Strategy at JonesTrading, believes that Bitcoin's decline is part of an ongoing risk-cutting trend across financial markets.
According to him, in the context of risk-averse sentiment dominating trading activity, Bitcoin's recovery in the previous session lacked the foundation to be sustained.
However, not all experts are pessimistic about the prospects of the world's largest cryptocurrency.
Norberto Giudice, an expert in cryptocurrencies and blockchain, argues that much of Bitcoin's recent decline stems from factors outside the digital asset market, rather than weakness in the cryptocurrency's fundamental elements.
According to him, the current correction is not directly related to the price cycle or the fundamental value of Bitcoin. Therefore, once the volatility in the global financial markets subsides, the world's largest cryptocurrency still has the potential to continue its long-term growth trend.
