Crypto market in the red: why is Bitcoin losing value?
In early November, Bitcoin continued its decline, falling below $74,000. At one point, the price of the world's leading cryptocurrency reached $73,800, while most of the largest digital assets in the top 30 also moved into negative territory.
The situation in the cryptocurrency market is unfolding against the backdrop of a major correction in US stock indices. During a single trading session, the Nasdaq* lost 5.5%, while the S&P 500* declined by 4.4%. The sell-off in technology stocks also affected digital assets, which investors continue to regard as high-risk investments.
* Nasdaq Composite is one of the major US stock market indices, tracking the performance of thousands of companies listed on the Nasdaq exchange. Technology companies, including Apple, Microsoft, and Nvidia, account for a significant portion of the index. It is considered an important indicator of the technology sector's performance.
* S&P 500 (Standard & Poor's 500) is one of the key US stock market indices, comprising shares of 500 leading American companies from various sectors of the economy. The index is market-cap-weighted and is widely used to assess the overall performance of the US stock market.
The current Bitcoin correction has been driven by five negative factors that have simultaneously intensified pressure on financial markets.
1. Democratic victory in US elections and uncertainty over crypto regulation
One of the main reasons behind the deterioration in investor sentiment was the outcome of the US congressional midterm elections. Following the November 4 vote, the Democratic Party gained control of both chambers of Congress. The newly elected Congress will begin its work in January 2027.
For the cryptocurrency industry, this outcome raises the possibility of stricter regulation. Democrats have traditionally taken a more cautious approach to digital assets than Republicans, who previously actively promoted legislation supporting the industry.
The future of the CLARITY Act, a bill aimed at establishing a regulatory framework for the US cryptocurrency market, has also become uncertain. The initiative had President Donald Trump's support, but its passage may now face significant political obstacles.
According to research firm Tiger Research, Democrats could not only block new legislative initiatives but also seek to revise certain provisions of the existing regulatory framework. In particular, discussions have emerged about potentially expanding the authority of the US Securities and Exchange Commission (SEC) while limiting the role of the Commodity Futures Trading Commission (CFTC).
Senator Elizabeth Warren, known for her critical stance toward the cryptocurrency industry, could become a key figure in this process. She is expected to chair the Senate Banking Committee and focus on investor protection, investigating potential conflicts of interest, and scrutinizing cryptocurrency companies.
However, the election results did not come as a complete surprise to the market. Even before the vote, participants on Polymarket estimated a 65.5% probability that Democrats would win control of both chambers. Nevertheless, the political shift increased uncertainty about the industry's future.
Following the elections, Bitcoin briefly climbed above $80,000, but on November 5–6, it lost more than 7%, falling to $75,200.
Despite the negative market reaction, analysts emphasize that US elections do not determine the future of the entire cryptocurrency industry. According to Grayscale, the United States accounts for only 15–20% of global digital asset activity, while cryptocurrency adoption continues regardless of the political situation.
2. Escalating tensions around Iran and the risk of accelerating inflation
The second factor was rising geopolitical tensions in the Middle East.
Threats of renewed US strikes against Iran, along with reports of attacks on vessels in the Strait of Hormuz, heightened concerns among financial market participants.
The primary risk is a potential increase in energy prices. Disruptions to oil supplies could accelerate global inflation, making it significantly more difficult for the US Federal Reserve to continue easing monetary policy.
High inflation limits the Fed's ability to lower interest rates, while persistently tight financial conditions generally weaken demand for risk assets, including cryptocurrencies.
3. Nvidia scandal and pressure on the technology sector
Another source of instability was reports of an investigation involving Nvidia CEO Jensen Huang.
According to emerging reports, US intelligence agencies have been examining alleged connections between the company's chief executive and a woman suspected of being an informant for Chinese intelligence.
Although no evidence of leaked trade secrets has been presented, the situation itself has heightened investor concerns about potential risks facing the world's leading manufacturer of artificial intelligence hardware.
Nvidia plays a crucial role in the global AI industry, so any developments that could affect its operations tend to trigger noticeable reactions in the stock market.
The broader correction in the technology sector added further pressure. After reaching a local peak on November 4, the Nasdaq index lost approximately 7%, while the semiconductor industry index declined by around 16%.
The sell-off in technology stocks gradually spread to cryptocurrencies, accelerating capital outflows from high-risk assets.
4. Growing doubts about the return on artificial intelligence investments
The fourth factor was deteriorating expectations regarding the economic returns from massive investments in artificial intelligence.
Investors paid particular attention to preparations for Anthropic's IPO* and the company's disclosed financial performance.
* IPO (Initial Public Offering) is the process through which a company offers its shares to the public on a stock exchange for the first time, making them available to a broad range of investors. An IPO allows a company to raise additional capital for business expansion, new projects, debt repayment, and other corporate purposes.
With quarterly revenue of approximately $17 billion, the company's net loss reportedly reached $23.3 billion. Meanwhile, obligations related to computing infrastructure approached $900 billion.
These figures intensified discussions about how quickly artificial intelligence investments could begin generating sustainable profits.
Market participants are increasingly questioning whether record spending on data centers, computing equipment, and AI model development is justified.
Concerns about the sustainability of the technology sector have become a key driver behind a large-scale reassessment of risk across global financial markets.
This is particularly significant for cryptocurrencies, as investors often reduce their exposure to several asset classes simultaneously during periods of declining risk appetite.
5. Massive Binance hack and growing concerns over crypto asset security
The fifth major blow to investor confidence came from cyberattacks targeting financial infrastructure.
The most significant incident was the hack of Binance, the world's largest cryptocurrency exchange, during the night of October 29–30. Losses from the attack were estimated at $6.34 billion.
According to Binance's preliminary report, the attackers spent several months preparing to infiltrate the exchange's internal infrastructure.
The first attempts to compromise employees began in June, when a staff member downloaded a fake installer for Homebrew, a macOS package manager.
In September, the attackers arranged a fraudulent job interview with another employee and persuaded them to download a test assignment containing malicious code.
In October, the access obtained allowed the attackers to exploit the company's internal tools, including an AI system, to compromise additional accounts. They eventually gained access to a service responsible for signing cryptocurrency transactions.
On October 29, the hackers executed a malicious script and initiated withdrawals from Binance's hot wallets. The stolen assets included 18,270 BTC, as well as funds on the XRP, Solana, and Optimism networks.
To withdraw assets on Ethereum, the attackers used the EIP-7702 mechanism, which allows smart contracts to be granted authority to execute operations on behalf of a wallet.
According to the exchange, approximately $2.85 billion in stolen assets was frozen following the attack. The company also reported setting aside funds covering more than 100% of the losses and restoring 98% of the affected tokens in its reserves.
Binance redesigned the architecture of the compromised wallets, replaced employees' work devices, revoked old credentials, and strengthened its suspicious activity detection systems.
The FBI attributed the attack to the North Korean hacking group TraderTraitor. North Korean authorities deny the allegations.
However, the consequences of the hack continue to affect the market. During the first 46 hours after withdrawals resumed, net capital outflows from Binance exceeded $5 billion.
This reduced available liquidity, which subsequently recovered only partially. Under such conditions, even relatively large sell orders can trigger significant price fluctuations.
Additional concerns were raised by a cyberattack on the French financial group Crédit Mutuel Arkéa, which reportedly involved the theft of ˆ118 million in crypto assets.
Institutional investors are also reducing their exposure
In addition to the factors listed above, pressure on the market has intensified due to capital outflows from US spot cryptocurrency ETFs*.
* ETF (Exchange-Traded Fund) is an investment fund whose shares or units are traded on a stock exchange in much the same way as ordinary company shares. ETFs allow investors to gain exposure to specific assets, market indices, or investment strategies without having to purchase and manage each underlying asset individually. Depending on its structure, a fund may invest in stocks, bonds, commodities, cryptocurrencies, and other financial instruments.
According to analysts, net outflows from Bitcoin ETFs totaled approximately $1.28 billion over the previous week.
On November 5 alone, according to WuBlockchain, investors withdrew approximately $430 million from spot Bitcoin ETFs and nearly $100 million from Ethereum funds.
This trend indicates a declining willingness among institutional investors to take risks amid political, geopolitical, and economic uncertainty.
Together, these circumstances create additional obstacles to a recovery in the cryptocurrency market.
Factors that could support a crypto market recovery
Despite short-term risks, several analysts believe that political developments should not significantly affect Bitcoin's long-term prospects.
Analysts at VanEck, for example, argue that election results can trigger sharp short-term price movements that do not reflect the cryptocurrency market's underlying fundamentals.
The need for compromises between Congress and the presidential administration could lead to higher US government spending and an increase in national debt. Over the longer term, this could make Bitcoin more attractive as an alternative monetary asset.
For example, following the 2022 midterm elections, Bitcoin established a market bottom and gained nearly 300% over the next four years.
Analysts at CoinShares and Bitwise Europe believe that real yields on financial instruments, US dollar liquidity, Federal Reserve monetary policy, and capital flows into exchange-traded cryptocurrency products remain more important factors for Bitcoin's future performance.
Furthermore, the development of digital assets has long extended beyond the US political agenda. Companies such as Visa, Mastercard, and Stripe are adopting stablecoin technologies, while BlackRock, Franklin Templeton, and JPMorgan are developing the market for tokenized investment products.
Thus, despite potential short-term volatility, the cryptocurrency market continues to have underlying conditions that could support further growth.