Bitcoin steadies after record hack fallout, US midterms turbulence

Bitcoin steadied near recent lows after a turbulent trading session on November 5, influenced by weak chipmaker earnings and a Democratic win in the US Congress. The primary cryptocurrency hovered around $75,600 on November 6, having plummeted over 6% from an opening price above $80,000. Smaller coins like BNB, Ether, and Solana remained relatively stable.

Chipmakers' recovery helped buoy the stock market on November 6, despite economic indicators supporting the notion that the Federal Reserve may raise interest rates in December.

Dean Chen, an analyst from Bitunix, stated that Bitcoin appeared to be experiencing a respite from yesterday's sharp sell-off, yet cautioned against attributing this to a reversal just yet, emphasizing that the current trend could be a reduction in selling pressure rather than new accumulation.

The sector faced significant disruption following a $6.3 billion hack on Binance digital-asset exchange on October 29, which has diminished investor confidence in the asset class. This market turbulence has been exacerbated by volatility in other areas, particularly the decline of artificial intelligence stocks, which has negatively impacted crypto mining companies, given their transition towards AI in recent years.

Rudolph, the chief technical analyst at IG, highlighted that the sell-off signals growing uncertainty about the profitability of substantial AI investments, concerns over stricter regulations slowing down data-center construction, and a more general pullback from highly-valued growth assets. However, Bitcoin has so far managed to maintain its position, suggesting that investors are stepping in to support current levels.

This relative strength could serve as a critical gauge to determine if Bitcoin has started to separate from the technology trade, rather than just following it downward.

Spot Bitcoin exchange-traded funds in the US noted $430 million in outflows on November 5, with Fidelity Wise Origin Bitcoin Fund leading the outflows at approximately $200 million, followed by BlackRock’s IBIT with about $105 million. Samuel Leyne, co-head of crypto trading at Marex, indicated that while the selling seems to be easing, the recent rebound appears to be a short-lived relief rather than a lasting recovery.

He emphasized the necessity for a genuine catalyst to restore confidence, such as a reduction in geopolitical tensions, a drop in oil prices, or improved macroeconomic conditions. Until then, Leyne advised closely monitoring stocks, ETF flows, and basis levels, noting that Bitcoin needs to surpass $77,000 to generate momentum, and if equities continue to decline, $75,000 could again become relevant.