Price movements reflected investors' assessment of the US congressional election results. The Democratic victory in both chambers initially encouraged optimism over the geopolitical and trade outlook. Investors expected the incoming majority to put pressure on President Donald Trump's administration to end military operations against Iran and seek at least a partial rollback of higher tariffs on goods from close trading partners. These developments could reduce the risk of accelerating inflation and the need for further Federal Reserve rate increases. By Thursday, the probability of a December hike had fallen from above 80.0% to around 66.0%, according to CME FedWatch. Against this backdrop, the dollar lost ground as alternative assets, including cryptocurrencies, initially advanced.
On Thursday, the market entered a sharp correction as traders began assessing potentially adverse implications of the congressional shift for technology companies. Several Democratic lawmakers have called for tighter oversight of artificial intelligence (AI) and legislation protecting consumers from electricity price increases linked to data centres. Bernie Sanders, the independent senator from Vermont who caucuses with Democrats, called for a nationwide moratorium on new data centre construction, citing concerns about environmental damage and job losses. The prospect of a slower technology-sector expansion contributed to falling equity indices and selling across digital assets. According to CoinGlass, more than $1.0 billion in cryptocurrency derivatives positions were liquidated over 24 hours, with most losses coming from long positions. This was the largest liquidation wave since the late-October selloff covered in our previous crypto weekly review, when BTC/USD fell from nearly 82000.00 to around 76000.00. Some analysts expect work on the Digital Asset Market Clarity Act, known as the CLARITY Act, to stall, potentially delaying progress until 2028. They also warn that any revised version could be less favourable to the industry. Congressional scrutiny could instead focus on Trump's ties to cryptocurrency businesses, including World Liberty Financial. Nevertheless, the sector is likely to continue developing as investors recognise the benefits of faster settlement, lower costs and markets that operate around the clock, although the pace of expansion could slow considerably.
Overall, sentiment towards digital assets remains weak, with the Crypto Fear & Greed Index at 28 in the “Fear” zone. Under these conditions, prices could extend their decline or move into consolidation next week.
