Author: Zhou, ChainCatcher

On November 5, Eastern Time, the US stock market experienced the largest single-day sell-off since April 2025.

After the Democratic Party swept both houses of Congress in the midterm elections, the market worried that the construction of AI data centers would be slowed down, leading chip stocks to lead the decline, with the Nasdaq Composite Index dropping 5.52%, closing in a technical correction zone.

Asian Pacific stock markets opened lower on Friday, with South Korea's KOSPI triggering a trading halt during the session.

The cryptocurrency market could not avoid the fallout either. Bitcoin briefly fell below $76,000, and Ethereum dipped below $2,250, fully reversing the gains made after the midterm elections.

As of publication, according to CoinGlass data, over $1.2 billion was liquidated across the network in the past 24 hours, with longs accounting for nearly 90%.

Wall Street shifts from bullish to bearish, AI sell-off spreads to Asia-Pacific

Just a day before the crash, Wall Street remained generally bullish. After the election results were announced, the S&P 500 index rose nearly 2% in one day on Wednesday, and the Dow Jones index climbed over 3%.

Institutions such as JPMorgan, Nomura, HSBC, and Citadel Securities successively released bullish reports, citing that positions from institutions were significantly reduced before the election, and once uncertainty dissipated, there would be plenty of room for funds to refill.

Data from Citadel Securities also showed that retail investors had net bought US stocks for 22 consecutive trading days, totaling nearly $33 billion.

However, the optimism lasted only one day. After the market opened on Thursday, it began to reassess the impact of the Democratic victory on the AI industry. Not only did the Democrats secure both the Senate and the House, but they also won gubernatorial elections in key data center hubs such as Texas and Georgia. The new governor of Texas, Gina Hinojosa, had advocated for an immediate pause on the construction of new data centers.

UBS estimated that about 30% of the planned new data center capacity in the US for 2028 could be affected by potential construction pauses.

The sell-off quickly spread from chip stocks. On that day, the Philadelphia Semiconductor Index fell 12.25%, which according to Reuters statistics is the second-largest single-day drop recorded for this index. Nvidia dropped over 9%, while Micron and AMD each fell about 17%.

At the close, the Dow Jones dropped 3.44%, the S&P 500 index fell 4.36%, and the Nasdaq 100 index decreased 6.36%. The total market capitalization of US stocks evaporated by about $3 trillion in one day.

Charlie McElligott, a cross-asset strategist at Nomura, described the market as abandoning this year's leading stocks as hedge funds rushed to lock in profits before the year's end. Retail investors reversed their habit of buying on dips, with Vanda Research data indicating that retail investors had net sold individual stocks on that day at the largest scale since March 2020. The firm's global macro strategist, Viraj Patel, deemed this a comprehensive surrender from retail investors.

On Friday, stock markets in Asia Pacific continued to decline. The South Korean exchange triggered a trading halt at 9:03 AM local time, pausing trading for 20 minutes, with the KOSPI index falling by as much as 8.8%, breaking below 5,000 points for the first time in nine months. Samsung Electronics and SK Hynix both saw declines of over 10%. The Nikkei 225 index dropped over 6% during the session, while Taiwan's stock market fell over 8% at one point.

Bitcoin drops below $76,000, leveraged funds face a double hit

The movements in the cryptocurrency market were almost in sync with the US stock market. After the election results were disclosed on Wednesday, Bitcoin briefly surged above $80,000, leading to concentrated liquidations of short positions.

On Thursday, the situation completely reversed. According to CoinGecko data, when the Nasdaq fell nearly 4% during the session, Bitcoin plummeted from $78,767 to $75,986 within an hour. Subsequently, Bitcoin briefly plunged below $76,000, marking a new low since mid-September, and dropped below the 50-week moving average. Ethereum fell in tandem, dipping below $2,250 at one point.

For the entire day on Thursday, Bitcoin fell about 6%, comparable to the declines of 5.52% for the Nasdaq Composite Index and 6.36% for the Nasdaq 100 Index, and significantly less than the 12.25% drop for the Philadelphia Semiconductor Index.

CryptoQuant analyst Darkfost had previously pointed out that measured with a 90-day rolling window, the correlation between Bitcoin and the S&P 500 had risen above the historical average level.

Regarding the spot ETF, SoSoValue data indicated that US Bitcoin spot ETFs saw a net outflow of $430 million on November 5, with none of the 12 ETFs seeing net inflows. The total net asset value dropped from $102.26 billion the previous day to $96.65 billion, falling below $100 billion.

In fact, this round of capital withdrawal had begun before the elections. Over the five trading days since October 30, only November 4 saw net inflows for Bitcoin spot ETFs, resulting in a cumulative net outflow of about $1.51 billion. The situation was weaker for Ethereum spot ETFs, which saw a net outflow of $99.97 million on November 5, with only 3 of the last 16 trading days since October 15 recording net inflows.

In the derivatives market, unlike Wednesday's scenario, this time it was the longs that were liquidated. CoinGlass data showed that $1.251 billion was liquidated across the network in the past 24 hours, with $1.108 billion in long positions, accounting for 88.6%, affecting a total of 239,896 individuals.

Additionally, the sell-off in US stocks also directly transmitted to the cryptocurrency derivatives market through perpetual stock contracts. CoinGlass’s liquidation heatmap indicated that contracts related to SNDK and SOXL had liquidation amounts of $58.32 million and $56.71 million respectively, both exceeding SOL's $43.25 million.

Market sentiment subsequently turned cold,with the CoinGlass Fear and Greed Index dropping to 27 on Friday, down 24 points from the previous day, falling into the panic zone, while the 30-day average remained at 50.

Cryptocurrency stocks generally slump,mining companiesbecomedisaster areas

The decline in cryptocurrency prices also dragged down cryptocurrency-related stocks listed in the US. Among them, in trading platforms and compliance companies, Coinbase dropped 9.69%, Robinhood fell 10.32%, and Circle declined 8.72%.

Digital asset reserve companies generally saw declines exceeding those of their held assets,with Ethereum reserve company Bitmine and SharpLink dropping 12.56% and 10.21% respectively, while Bitcoin reserve companies Strategy and Strive fell 9.29% and 10.17% respectively, all greater than the declines of Ethereum and Bitcoin during the same period.

The deepest drop was seen in Bitcoin mining companies that transitioned to AI data centers over the past two years.

These mining companies, holding energy resources and sites, have been transforming their mining facilities into AI computing centers, with valuations rising alongside the AI infrastructure boom. SemiAnalysis estimates that Texas accounts for about 30% of the planned operational data center capacity in the US for 2028, far exceeding other states.

The decline of mining companies began on Wednesday, with Core Scientific dropping 11.6%, IREN falling 12.5%, and Cipher Digital plunging 21%.

Bernstein subsequently lowered the target prices for seven mining companies, citing tightened financing and unclear prospects for Texas, with IREN downgraded from $100 to $55, and TeraWulf from $36 to $20. The firm noted that among the companies they covered, IREN, Riot, and Cipher had the largest exposure to Texas.

On Thursday, the US stock market crashed further, and the declines for mining companies widened. Bitdeer fell 18.68%, IREN dropped 16.95%, CleanSpark declined 16.47%, Cipher fell 14.62%, MARA decreased 14.48%, and TeraWulf dropped 13.85%.

The market awaits Anthropic IPO and Nvidia's earnings report

In the next two weeks,technology stockswill face two crucial milestones.

Firstly, the listing process of Anthropic. Just a day before the crash, HSBC's chief multi-asset strategist Max Kettner regarded the Anthropic IPO as a real liquidation event for technology stocks, believing that if successfully completed, it could trigger a broad bullish trend in tech stocks. Now this event itself has turned uncertain.

According to Reuters, four informed sources revealed that potential investors doubted whether Anthropic could launch its roadshow as planned during the week of November 9 and go public within the month, particularly if AI-related assets continued to feel pressure, which could lead to a delay in the listing. Investors are also waiting for the company's revenue data for October, which remains blank in the updated S-1 filing.

Valuation expectations are also being adjusted. The Wall Street Journal reported that the three major investors planning to participate in the subscription believed that it would be difficult for the company to achieve its previously anticipated valuation of $1.5 trillion after the sell-off, with one believing it might be closer to $1 trillion. Just over a month ago, the market was discussing a valuation around $2 trillion.

The second milestone is Nvidia's third-quarter earnings report set to be released after the US stock market closes on November 17,with low expectations from the market. Nvidia previously provided guidance in August for revenues of about $108 billion for this quarter, a year-on-year increase of about 106%, with consensus analyst expectations being around $109 billion. This guidance did not include income from its data center computing business in the Chinese market.

More attention is being paid to management's statements regarding future demand prospects. Nvidia has already signaled in its quarterly risk disclosure that power shortages, financing constraints, and regulatory obstacles to data center construction could delay customer deployment schedules and dampen revenue growth. Following the Democratic victory, these risks are the focus of investor reassessment.

As the most core company in the AI infrastructure chain, Nvidia's statements will directly impact the market's judgment on the pace of data center construction, and the mining companies transitioning to AI are also situated along this chain.

From US stocks to Asia-Pacific, and then to the cryptocurrency market, the main thread of this round of declines has always been AI trading. JPMorgan strategist Nikolaos Panigirtzoglou previously hinted that hedge funds, after experiencing the October sell-off, might need several weeks of market stabilization before re-establishing exposure to AI. Hennion & Walsh Chief Investment Officer Kevin Mahn also believes that the market will experience more fluctuations ahead.

Anthropic's IPO roadshow and Nvidia's earnings report will both be revealed in the next two weeks. Their outcomes will not only concern tech stocks but also determine whether this round of correlation declines from US stocks to Asia-Pacific chip stocks and cryptocurrency assets can find a footing.

Crypto critic Warren may lead Senate Banking Committee, crypto legislation faces impasse again

In terms of policy regulation, the impact of the Democratic victory on the cryptocurrency industry may be significant.

The crypto-friendly chair of the House Financial Services Committee, French Hill, although winning re-election, will hand over the chairmanship in January as the Democrats take over the House. According to Reuters, senior Democratic congressman Maxine Waters is the leading candidate to succeed him.

In the Senate, Elizabeth Warren, who has long held a critical stance towards the cryptocurrency industry, is expected to lead the Banking Committee. She has previously co-signed letters to the Department of Justice and the Treasury, demanding explanations about the investigation into the Trump family's crypto business.

Democrats have also insisted on including ethical clauses to limit conflicts of interest for government officials in the CLARITY Act; according to Bloomberg, this disagreement has caused the bill to stall. In September of this year, the CLARITY Act failed to advance in the Senate procedural vote by a vote of 49 to 50.

Warren’s stance towards new types of crypto-related products is similarly stringent. On November 3, the CFTC announced it would allow individual stock perpetual contracts to be listed for trading on its registered exchanges, to which Warren immediately responded with a statement that such high-risk products are prone to insider trading and could cause significant market volatility.

Several institutions believe that cryptocurrency legislation will be delayed further. Stifel Chief Washington Policy Strategist Brian Gardner believes that the CLARITY Act is unlikely to advance during the remaining term of this Congress, and the probability of reaching a bipartisan compromise in the next Congress is also low. He also expects Warren to investigate cryptocurrency companies. Compass Point analyst Ed Groshans pointed out that after Warren takes the lead of the Banking Committee, the mainstreaming of cryptocurrency assets will largely depend on regulatory actions by the SEC and CFTC.