Cryptocurrencies rebounded on Wednesday after sharp overnight losses following the Democrats' victory in the US midterm elections. The crypto industry, which had hoped for faster deregulation under Republican leadership, faced uncertainty as the Democrats took control of both houses of Congress. Bitcoin briefly hit a six-week low before recovering to trade up 0.7% at $78,354 by 0841 GMT. Ether also gained 1.4% to $2,323, while smaller tokens like Sol, Dogecoin, and Ada saw modest gains between 1.6% and 2.2%.
The broader crypto market has lost around $300 billion in value over the last month, driven by concerns over AI returns and rising borrowing costs. Investors pulled $215 million from the largest bitcoin-backed exchange-traded funds in October, marking a year-to-date outflow of $1.84 billion. The recent $6 billion hack of the Binance platform further dented market sentiment, triggering the largest net weekly outflow from bitcoin ETFs since early July.
Tim Sun, a senior researcher at HashKey, noted that investors are reassessing the risk-reward profile of crypto assets. Security incidents and potential shifts in US political landscape could stall crypto legislation and institutional framework development. Meanwhile, former US President Donald Trump, a vocal advocate for crypto, has introduced lighter enforcement and created a strategic bitcoin reserve since his return to office.