Bloodbath is the perfect word to describe the post-election market action.
Despite the markets trading on the assumption that Democrats will win, with odds hitting a high of 99%, crypto has suffered a severe sell-off. However, the downside may not be over yet. The total crypto market cap has now slipped back to mid-September levels, marking five straight weeks of losses and wiping out nearly $900 billion in market value.
The result? A textbook liquidity sweep. According to Coinglass, nearly $1 billion in positions were liquidated on the 5th of September, marking the largest single-day wipeout since the $2 billion short squeeze in mid-August. However, unlike that event, nearly 80% of the liquidations came from longs, showing that bullish traders were heavily caught offside as the market moved lower.
That said, the sell-off wasn’t just “crypto-specific.”
As the chart above shows, the Nasdaq 100 suffered its largest one-day loss since the pandemic, while the S&P500 lost $3 trillion in value. This comes just 24 hours after the Dow surged 1,600 points after Democrats swept the midterms. This indicates that there has been an abrupt change in sentiment post-election.
Notably, the U.S. President Donald Trump took to Truth Social to say that it is one of the stock market’s “worst days in history.” The crypto wipeout seems to be part of a wider correction in the market, with post-election volatility adding to the selling pressure. However, the move may not be just another election-driven pullback. The latest market data suggests there could be more going on beneath the surface.
Crypto faces fresh capitulation risks as market sentiment weakens
The market FUD seems to be less about the election itself and more about President Trump.
From a technical standpoint, this shift in sentiment makes sense. Crypto initially saw a strong boost from optimism around his election, but that momentum has since faded. However, the momentum has died out. Bitcoin [BTC] is currently down almost 30% from its peak of $126k despite progress made in regulation with the GENIUS Act, greater tokenization and increased adoption in stablecoins into traditional finance.
To add to the pressure, there are now reports that Trump Media sold a total of $343 million worth of Bitcoin. This adds to concerns regarding institutional selling and has also created more FUD around Trump, further weakening the bullish sentiment that initially drove crypto’s post-election rally.
Against this backdrop, crypto’s wipeout could be more than just a reaction to broader market weakness.
Besides the traditional markets digesting how the election will affect the AI space, there are further pressures on the crypto space. On top of reports that Trump Media is selling off its Bitcoin, there continue to be outflows from ETFs. In essence, crypto is facing its own market-specific headwinds.
In turn, crypto could be entering a more severe capitulation phase now that prices have retreated back to mid-September levels.
Final Summary
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Crypto has lost nearly $900 billion in market value, with Bitcoin down almost 30% from its $126k peak.
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Trump Media’s reported Bitcoin sales and continued ETF outflows are adding to selling pressure, raising fears of deeper capitulation.