Bull market under pressure?
The crypto market is struggling. After five consecutive weeks in the red, uncertainty has replaced optimism. Is this just a temporary setback? Meanwhile, the balance of power in Washington has shifted, with potentially major consequences for the US crypto sector. Find out more in this edition of Bitvavo Market News.
Market update
The crypto market ended in the red again last week, marking the fifth consecutive week of declines for most tokens. Sentiment is gloomy as the Fear & Greed Index fluctuates between 25 and 30, reflecting persistent anxiety and uncertainty among investors.
The charts for many tokens look significantly weaker than a few weeks ago, as prices have fallen below horizontal support levels and moving averages that previously offered support. For Bitcoin, this includes the €70,000 mark; for Ether, €2,050; and for Solana, €83.
In the broader financial markets, concerns about AI stocks are mounting. Last Thursday, the Nasdaq 100 tech index fell 6.4% in its largest drop since the COVID-19 crisis in March 2020, while Bitcoin fell 5.5%. It's rare for Bitcoin to outperform the broader tech market on such a turbulent day.
Many investors assume that the €50,600 low on July 1 was the bottom of the bear market. That belief is now being tested. If the next low on the weekly chart is higher, it will support this scenario. Following a higher high, we'd then have a higher low, a key characteristic of an uptrend.
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Midterm election results change outlook for crypto
The Democrats have won the US midterm elections convincingly, securing majorities in both the House of Representatives and the Senate. This means the political climate in which the US crypto sector has grown over the past two years is set to change.
President Donald Trump promised to make the United States the 'crypto capital' of the world, and much has changed since he took office. The US passed stablecoin legislation, established a strategic bitcoin reserve, and saw key regulators shift their stance. Banks have turned from enemies into industry allies, actively participating in the market.
However, one major goal has remained out of reach: establishing clear rules for the entire US crypto market. The Clarity Act, which was to define the responsibilities of different regulators, stalled in the Senate in September.
A shift in the political landscape
The election results mean the latest version of the Clarity Act appears to be off the table for good. A new bill is still possible, but it would need to reflect Democratic priorities. These are likely to place more emphasis on consumer protection, anti-money laundering, and preventing conflicts of interest.
The balance of power in key Senate committees is also shifting. Elizabeth Warren, a long-time vocal critic of the crypto sector, is the leading candidate to chair the Senate Banking Committee. This means legislation related to banking, stablecoins, digital assets, financial institution oversight, and consumer protection in the financial sector would all pass through her committee.
Sherrod Brown is also returning to the Senate. He lost his seat in 2024 after the crypto sector poured millions of dollars into a campaign to defeat him.
What does this mean for the crypto market?
Initial reactions from the sector were cautiously optimistic. Crypto now has supporters in both parties, and involvement from traditional financial institutions has grown significantly. What's more, nothing will change at the regulatory agencies for the time being, and they currently have considerable influence over how the industry operates.
Either way, the future of crypto regulation is now less clear. Democrats will have more opportunities to influence oversight of the industry and, for example, launch investigations into the crypto business interests of Trump and his family. Some worry this could lead to a second 'war on crypto,' a stance that heavily impacted the industry during the Biden administration.
"Let's hope the next Congress can prioritize productive, thoughtful policies for the American people," wrote Galaxy's Alex Thorn, sounding somewhat uncertain.
Fingers crossed!
In other news
Americans could soon be able to invest their retirement savings in crypto. The White House is reviewing a policy that would allow such crypto investments. In the US, employees typically save for retirement by contributing part of their pre-tax salary to a designated investment account. They then choose their investments from a preselected, limited range, which does not yet include cryptocurrencies. The final version of the proposed rule is currently under review by the White House and has not yet been made public.
US scraps plan to require personal data sharing for smaller international transfers. FinCEN and the Federal Reserve had proposed lowering the threshold from $3,000 to $250, but have now withdrawn that proposal. Under the so-called Travel Rule, financial institutions must pass customer data to the next institution in the payment chain. The threshold remains at $3,000, including for crypto transactions covered by the rule. The agencies believe changes in the crypto market have made the 2020 proposal outdated.
Tether: number of gold-backed tokens grew by nearly 60% this year. This growth is notable because the price of gold has actually fallen since its peak in early January. Tether claims this proves that buyers are long-term investors who strongly believe in gold's role in the financial system. To back the tokens, Tether holds nearly 26 tons of gold in a Swiss vault. Tether tests the purity of the stored gold each quarter, and the results are publicly available.
Bitcoin miner Riot sells its Bitcoin to build AI data centers. In the first nine months of this year, the company sold 20,264 BTC for nearly $1.5 billion, leaving Riot with just 2,418 BTC at the end of September. Competitor Core Scientific announced last week that it would wind down its mining operations starting in 2027. For the Bitcoin market, selling pressure from this sector is steadily easing as miners' transition to AI enters its final stages.
Satoshi Radio (NL): In the latest episode of Satoshi Radio, the hosts discuss two major topics: the Binance hack and the outcome of the US midterm elections. For both events, the exact impact remains unclear. Is the crypto sector facing a difficult period ahead?
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.