From CryptoPotato · By Jordan Lyanchev
Bitcoin has dumped by over $14,000 in ten days, falling from $81,000 after the US midterms to under $67,000 on Saturday morning. This massive collapse came on the heels of several developments that signaled weakening demand for risk-on assets, while some industry-specific factors exacerbated the move.
The cryptocurrency has erased almost all gains charted since the mid-August rally, and here are the reasons we would gather.
Politics, Wall Street, Crypto Liquidity Issue
The Democratic sweep started the rejection. BTC initially sold off after the election as Dems swept both chambers of Congress, falling toward the mid-$75,000s, before rebounding sharply and briefly to $81,000. This recovery disappeared almost immediately amid fresh uncertainty around regulation, fiscal policy, and tech spending, and the broader investment environment during the second half of Trump’s term.
Wall Street suffered a massive tech-led crash. This happened just a day after the rally to $81,000. The Nasdaq plunged by more than 5% within a day, while the S&P 500 suffered its worst session in months. Just for reference: the S&P 500 lost roughly $3 billion in a single session, which is more than the entire crypto market’s capitalization. BTC followed suit as equities tumbled, reinforcing its tendency to behave as a high-beta risk asset when investors rush out of technology and other speculative markets.
Spot BTC ETF demand disappeared. Institutional flows into the financial vehicles tracking bitcoin offered no support, with withdrawals nearing $1.3 billion within a single week. This became the worst performance since June, and the past week wasn’t any better. The removal of one of the strongest marginal sources of BTC demand coincided with increased selling pressure.
Crypto liquidity is drying up. CryptoQuant reported a sharp decline in underlying demand recently, with estimated 30-day spot BTC demand falling to around -280,000 BTC. Perpetual futures demand also turned negative. Meanwhile, Tether supply has contracted, with USDT’s market cap dropping by about $6.6 billion over 60 days. This suggests that some of the dollar liquidity that helped finance earlier rallies has left the market.
Inflation, Nvidia, Strategy, and More
Hotter CPI and Fed-hike fears. October consumer inflation was higher than expected, pushing markets to increase the probability of another Fed rate increase in December. Higher yields and a stronger dollar generally make non-yielding and speculative assets less attractive, and BTC broke through several technical support levels shortly after the reading went live.
PPI increased the pressure. Producer-price data on Friday added another worrisome inflation signal. Even though the monthly number was less alarming, annual producer inflation remained elevated. This strengthened the broader concern that price pressures may prove more persistent than expected and keep the Fed restrictive for longer.