Bitcoin's 48-Hour Swing: Rally Fades as Selloff Hits

The election-fueled bitcoin rally proved short-lived. The digital asset rose above $80,800 after Tuesday's US midterm elections, only to drop to around $75,500 by Thursday, November 5.

The downturn occurred as Wall Street saw its most severe selloff in tech stocks in months, highlighting the fragility of bitcoin's recovery.

What Caused Bitcoin's Sudden Reversal?

The gains on Wednesday came after a week shaken by the Binance hack. Traders first embraced the conclusion of election uncertainty, yet a large portion of the rally was fueled by traders unwinding short positions on bitcoin.

Come Thursday, investors were reassessing what a Democratic majority in both Congressional chambers would mean.

Concerns about potential limits on AI data-center development weighed on semiconductor stocks, which were already under scrutiny over massive AI expenditures.

The Nasdaq dropped 5.5%, Nvidia declined 9.3%, and AMD tumbled 17.3%.

Bitcoin tracked the broader exodus from risk-on assets. Leverage then exacerbated the decline.

According to CoinGlass data, $1.08 billion in cryptocurrency positions were liquidated within 24 hours, with roughly $954 million of that in long positions.

Spot Market Also Saw Selling Pressure

The selling was not confined to leveraged futures.

Whalio's data from Binance's spot market indicated that aggressive buying exceeded selling by $141.2 million on November 4, when buy volume accounted for 54% of trades.

A day later, the situation had reversed.

By late on November 5, spot sellers outnumbered buyers by 10.8% of total turnover in 24 hours, one of the most pronounced selling imbalances in the last month. In the futures market, sellers led by 1.8% of turnover, though futures volume was significantly higher.

Open interest on Binance perpetual futures declined 7.1%, signaling that positions were being unwound.

Meanwhile, CryptoQuant's Coinbase Premium Index worsened from -0.09% on Wednesday to -0.19% early Thursday, indicating reduced spot demand in the US.

The figures confirm aggressive selling in both spot and leveraged markets, though they do not reveal which market initiated the crash.

Were BlackRock and Trump Media Behind Bitcoin's Selling?

BlackRock's IBIT saw $201.2 million in outflows on Wednesday, marking a fourth straight day of withdrawals. Nonetheless, US bitcoin ETFs as a whole saw $74.6 million in net inflows that day, mainly via Fidelity.

At the same time, addresses associated with Trump Media moved 4,259 bitcoin, valued at about $342 million, to Crypto.com.

This transfer sparked concerns of a potential sale, especially with a debt repayment deadline on November 30 looming. No sale has been confirmed.

Bitcoin Price Outlook: Key Levels to Watch

Bitcoin is currently testing the key $75,000 psychological level. A clear breakdown could see the price target the 200-day moving average around $73,200.

To restore market confidence, bitcoin must recover $80,000 and then surpass roughly $81,300, which is the 30-day moving average noted in Reuters' technical assessment.

For the time being, any recovery hinges on stronger spot demand and stabilization of the AI-driven selloff on Wall Street.