The crypto market's recovery came to an abrupt halt on Thursday, as total market capitalization fell by more than 5% to levels last seen in August — one of the sector's biggest one-day drops in weeks. The plunge, led by Bitcoin and Ethereum, marked a complete turnaround from Wednesday's positive price performance, when the entire market had risen on the back of Bitcoin's climb above $80,000.

The positive sentiment did not last. Bitcoin shed 5% over the past 24 hours to trade below $76,000, dragging the entire crypto market cap down to $2.54 trillion, its lowest level since mid-August. The recovering Crypto Fear & Greed Index — the sector's most widely followed sentiment gauge — which had moved back into Neutral territory, returned to Fear with a reading of 33 out of 100, reversing its recent improvement.

Midterm Results Trigger Tech Selloff That Hits Crypto

Thursday's sharp decline in digital assets was a reaction to the performance of technology stocks. The NASDAQ 100 fell 6.4% amid an investor selloff over concerns about how Democrats could regulate artificial intelligence. With Democrats taking full control of Congress, many now expect AI regulations to become stricter, and there are also concerns that the data center build-out underway in the United States could face major obstacles. The session underscored how tightly digital assets remain coupled to the broader technology trade when risk appetite turns.

Several candidates who campaigned on slowing down data center construction won elections to Congress and in gubernatorial races. Three Democratic candidates who promised a data center moratorium won governorships in Texas, Ohio and Georgia, while Democrats also retained Pennsylvania. Those wins came in areas where more than 50% of the US data center build-out is currently happening, meaning the planned AI infrastructure in those states could be paused — a development that would translate into lower demand for AI-related products. The stakes now reach beyond chipmakers: as large Bitcoin miners have repurposed their sites to host AI and high-performance compute, data-center policy has become an increasingly direct variable for the crypto industry itself.

Chip companies bore the brunt of the selloff. Nvidia fell 9% and Micron dropped 15%, while memory maker SanDisk declined 19%. SpaceX and Tesla fell 9% and 11%, respectively. By contrast, tech giants such as Google, Microsoft, Meta and Amazon recorded declines of less than 4%.

The rout was not confined to the NASDAQ 100. The S&P 500 and Russell 2000 each fell 4%, and even the Dow 30 slipped 3%, underscoring how broad the selloff was.

While the tech stock slump likely triggered the crypto market collapse, the sector was already struggling before Thursday. The impact from the Binance hack remains, and demand has been contracting as investors withdrew $1 billion from spot Bitcoin exchange-traded funds (ETFs) — brokerage-tradable funds that hold bitcoin directly, whose flows are often read as a barometer of institutional appetite. Separately, Riot, the Bitcoin miner that is pivoting to AI compute hosting — and whose hosting business therefore relies on the same kind of data-center capacity now facing political hurdles — announced that it is selling 20,264 BTC.

Bitcoin Hits Seven-Week Low as Liquidations Top $1 Billion Again

Thursday's crash meant Bitcoin reached its lowest price in seven weeks. The flagship asset fell as low as $75,580, then recovered slightly, though it remains below $76,000. Ethereum fell 7.5% to $2,250, SOL dropped below $90 after a 7% decline, and the Trump memecoin TRUMP was among the biggest losers in the top 100 crypto assets, down 12%.

Crypto derivatives traders absorbed the heaviest losses. More than $1 billion worth of positions were liquidated for the second day running, according to Coinglass, with long traders mostly affected. Around $954 million in long positions were wiped out, compared with just $127.1 million in short positions, bringing the day's total to roughly $1.1 billion. Liquidations are the forced closure of leveraged positions once losses exhaust a trader's collateral, and the heavy tilt toward longs shows the unwind reached borrowed bullish bets across the market rather than stopping at the two flagship assets. Indeed, Bitcoin and Ethereum accounted for only around 45% of total liquidations, with other altcoin positions also severely impacted.

From here, the observable markers are the pace of spot Bitcoin ETF flows, whether daily liquidation totals cool, and the first concrete steps on AI regulation from the newly seated Congress.

Source: The Market Periodical