According to Woofun AI, just one day after the US midterm election results were announced, the market quickly moved from a brief rebound to a state of sharp sell-off. According to Foresight News reporter ChandlerZ, with the collapse of technology stocks, especially the artificial intelligence sector, panic quickly spread to the cryptocurrency market, leading to a sharp drop in the price of mainstream assets such as Bitcoin, and market liquidity was severely impacted in a very short period of time.
In the early morning of November 6, the US stock market experienced an epic sell-off, and the total market value of US stocks evaporated by more than 3 trillion US dollars in a single day. The Nasdaq Composite Index fell 5.5%, the S&P 500 fell 4.4%, and the Dow Jones Industrial Average fell 1,833 points, or 3.4%. Chip stocks became the hardest hit area. Nvidia (NVDA.US) shares fell 9.3%, AMD (AMD.US) shares plummeted 17.3%, and the Philadelphia Semiconductor Index fell about 12%. According to Chicago Options Exchange data, the closing value of the Panic Index (VIX) soared to 28.18, a sharp increase of 69.66% from 16.61 the previous day.
The sharp increase in this volatility indicator reflects the market's high sensitivity to short-term uncertainty. Notably, according to Business Insider and Bloomberg, Walleye Capital, which manages about $17 billion, lost 5.9% in October, the worst monthly performance since March 2020. It has already cut its long and short stock team and plans to return part of the capital to investors; the systemic hedge fund Engineers Gate also cut most of its “Synthesis” stock team, losing 5.5% as of October 23. Losses and reduced positions of many funds have further accelerated the downward trend in the stock market.
The cryptocurrency market immediately experienced a linked decline, and the prices of BTC, ETH, and SOL collapsed across the board. Bitcoin briefly surpassed $80,000, but on November 5, it fell back to around $76,000 with tech stocks, almost erasing all of its gains. As of 11:00 on November 6, Bitcoin was trading around $76,100, down about 5.4% in 24 hours; the price of Ethereum was $2,241, down about 7.6%.
According to Woofun AI on-chain data, the total number of forcibly closed positions in the cryptocurrency derivatives market in the past 24 hours reached $1,239 million, of which $1,099 million were liquidated for long positions and $139 million for short positions. At 10 o'clock on November 6, the price of Bitcoin fell further to $76,056, hitting an intraday low of $75,230, and the 24-hour decline extended to 5.7%. Ethereum fell to an intraday low of $2,209, a 24-hour decrease of 7.8%; Solana's price fell to around $90, falling 6.5% in 24 hours.
The wave of sell-offs quickly spread to global markets, and Asian stock markets were not spared. The Korea Composite Stock Price Index fell 8.8% during the intraday period, triggering a fusing mechanism that suspended trading for 20 minutes; Japan's Nikkei 225 index saw the deepest intraday decline of 6.7%. The stock prices of South Korean chipmakers Samsung Electronics and SK Hynix (SKHY.US) both fell sharply, with Samsung Electronics falling more than 10% and SK Hynix falling more than 12%.
The underlying reason is that the market is beginning to question whether the hundreds of billion dollars of AI infrastructure invested by technology companies can bring sufficient revenue and profit growth. Data center construction is highly dependent on external financing, and the higher interest rate environment has significantly increased construction and debt repayment costs. Recent chip companies' financial reports failed to allay investors' concerns. The mobile chip sales volume announced by Qualcomm (QCOM.US) fell short of expectations, further suppressing market sentiment in the semiconductor industry.
Political and regulatory risks have become another key variable fueling market fears. After the US midterm elections on November 3, the Democratic Party won control of the Senate and House of Representatives. Despite a market rebound early in the election, investors quickly reassessed policy prospects. After the Democratic Party takes control, data center projects may face stricter scrutiny in terms of grid capacity, water use, energy prices, and environmental impact, and local government approval processes may slow down. More worryingly, Arizona Democratic Representative Yassamin Ansari called for suspending advanced AI development, regulating this “out of control” industry, and banning artificial superintelligence as priorities on the first day of the Democratic Party's agenda. The “Act Prohibiting Artificial Superintelligence” that she has co-signed is not new: the House version H.R.10538 was proposed by Representative Greg Casar on September 24, and the Senate version S.5493 was proposed by Senator Bernie Sanders on September 23. The two cases are currently in the Supervisory and Government Reform Committee and the Commerce Science and Transportation Committee, respectively, and have not yet become law. The bill proposes to establish a federal-level artificial intelligence authority to suspend the training, revision, and deployment of advanced models that have reached the threshold of training computing power until the agency is fully staffed and security rules are established; offending companies may face forced dissolution, and individual violators can be sentenced to up to 20 years in federal prison.
Furthermore, the bill lists a “global ban on superintelligence” as a foreign policy goal of the United States, and aims to prevent the development of super AI in any region of the world through export controls. Notably, the strictness of these proposals far exceeds market expectations for future AI regulation.
The opinions of industry experts and market performance confirm each other, highlighting structural risks. Joshua Lim, head of global markets at FalconX, pointed out that investors are beginning to consider the impact of the slowdown in data center construction, and the previous rebound was largely due to a rush to fill up positions and go long. Carlos Guzman, vice president of research at digital asset trading firm GSR, believes that the market has long questioned the return on huge AI infrastructure investments, the election results have increased uncertainty, and chip company earnings have brought additional downward pressure.
This pressure affects Bitcoin mining companies. Many mining companies use the advantages of electricity and facilities to expand their AI computing service business, and their stock prices are affected by both Bitcoin prices and data center revenue expectations. According to media reports, the relevant mining stocks fell between 15% and 20%. Listed crypto companies also fell sharply. By the end of the US stock market on November 5, Coinbase (COIN.US) shares fell about 9.7% to $136.82; Circle (CRCL.US) shares fell by about 8.7% to $69.48; and Strategy (MSTR.US), which holds large reserves of Bitcoin, fell by about 9.3% to $129.30. These companies declined even more during the day's trading session, reflecting capital's complete avoidance of crypto-related assets.
The future market outlook depends on the effectiveness of key support levels and macroeconomic data guidance. The price of Bitcoin once fell to around $75,300, close to the short-term cost level for holders that institutions are concerned about. In its Nov. 4 report, Bitfinex estimated the average cost for short-term holders to be around $75,800. If the price falls below this level, buyers will face unrealized losses in the near future, and selling pressure during the rebound may limit the upward momentum. Bitfinex expects Bitcoin transactions to fluctuate between $75,800 and $80,200 before the rights expire on November 6.
If the daily closing price falls below short-term holder costs and the share of profitable supply falls below 58%, the price may fall further into the $70,000-$75,000 range. The 21Shares report suggests two scenarios: in a bullish scenario, if buying support is obtained in the $76,000-$78,000 range and ETF inflows resume, Bitcoin is expected to rise back to $80,000-82,000, targeting $87,000; in a bearish scenario, if the dollar strengthens, credit tightens, and the ETF continues to net sell, Bitcoin may test $73,000 support.
According to Farside Investors data, US spot Bitcoin ETFs had net outflows of $399 million and $116 million on November 2 and 3, respectively, and converted to net inflows of $74.6 million on November 4, but the cumulative net outflow reached $325 million on the morning of November 6. Jasper De Maere, head of research at Wintermute, believes that despite the poor performance of AI stocks, cryptocurrencies are still resistant to falling and remain optimistic about the medium-term outlook.
However, the October non-farm payroll data will be released at 21:30 on November 6, and the consumer price index for October will be released on November 10. If data reinforces expectations of high interest rates, tech stock valuations and risk appetite in the crypto market will continue to be under pressure; conversely, weak data may bring opportunities for a rebound. This is another major test facing the market after the election. The game between capital flows and macro-data will determine short-term trends.