U.S.-China Relations
NextFin News - Bitcoin briefly touched a six-week low on Wednesday before clawing back to trade roughly flat near $78,070, but the rebound masks a deeper question hanging over the world's largest cryptocurrency: after falling about 38% from its October 2025 record high, is this selloff a cyclical shakeout with a floor already in place, or the opening of a longer slide that the midterm election results have just unlocked?
The answer matters because two shocks landed in the same week. On November 3, Democrats won majorities in both the Senate and the House - a potential blow to a crypto industry that has spent two years lobbying for faster deregulation. Days earlier, the world's largest cryptocurrency exchange, Binance, reopened withdrawals after a record $6.3 billion hack that the FBI has attributed to North Korea. By Wednesday morning, the broader crypto market had shed roughly $300 billion in value over the past month alone, leaving it at about $2.61 trillion, according to CoinMarketCap.
Bitcoin is trading at $78,503 as of mid-morning New York time, up 1.99% on the day but still 9.22% lower over the past month and 22.73% lower over the past year. It sits below its 50-day average of $81,913, and its 52-week range - a low of $57,748 to a high of $107,428 - frames the battlefield ahead. The token's all-time high of $126,198, set in early October 2025, now looks a long way off: reclaiming it requires a climb of about 61% from here.
Two Shocks, One Weak Market
The sequence of events explains why the bounce looks fragile. The Binance breach, which investigators say occurred on or about October 29, stole more than $6 billion in virtual assets - the largest heist in crypto history, and more than four times the size of the previous record, the $1.5 billion taken from Bybit in February 2025. When Binance phased withdrawals back in starting at 0600 GMT on Sunday, customers moved funds off the platform faster than they moved them back on. Between the reopening and mid-afternoon GMT, the exchange processed $4.65 billion in withdrawals against $1.01 billion in deposits, a net outflow of $3.64 billion.
That is a material run on the industry's largest venue, but it is not yet a solvency crisis. Binance said the net outflow represents just 2.1% of its $171 billion in total assets, based on its latest proof-of-reserves data, and the exchange replaced approximately 95% of the stolen assets with company funds, pledging that customers would not absorb the loss. The Federal Bureau of Investigation said the hacking group known as TraderTraitor, linked to the North Korean government, was converting most of the stolen assets into Ethereum to obscure the trail. TraderTraitor was also behind the Bybit attack.
The political shock is slower-moving but cuts closer to the thesis that powered the 2025 rally. During his 2024 presidential campaign, Donald Trump vowed to make the United States "the crypto capital of the world," and his administration followed through: lighter enforcement, a strategic bitcoin reserve, easier banking access for crypto firms, broader exchange-traded product availability, and a federal stablecoin law. Much of that agenda still required a friendly Congress to deepen - and the midterm results put that pipeline at risk. A HashKey researcher, Tim Sun, framed the double bind directly:
"The market may be re-evaluating the risk-reward profile of crypto assets. On one hand, the string of security incidents is forcing investors to re-examine the industry's security infrastructure and custody risks. On the other hand, potential shifts in the US political landscape could stall the progress of structural crypto legislation and institutional framework development. All of these factors leave the crypto market facing strong headwinds."
Institutional flows confirm the rotation out. US spot bitcoin exchange-traded funds recorded a second consecutive week of net withdrawals totaling about $228.6 million over the five trading days ending October 16, with BlackRock's iShares Bitcoin Trust, the largest of the group, accounting for roughly $165 million of the redemptions. Month-to-date outflows approached $615 million. When the vehicles that brought mainstream money into bitcoin start netting negative, the marginal buyer disappears - and prices fall on their own weight.
The Midterm Pattern: Why This Cycle Broke the Rule
History offers an uncomfortable parallel, and a possible escape hatch. Bitcoin fell in each of the last three midterm election years - 56% in 2014, 73% in 2018, and 64% in 2022, according to Binance Research. In each of those cycles, the price bottomed 13 to 71 days after the election. By that pattern, the low should still be ahead.
But this cycle already broke the script. Bitcoin hit its cycle low of $57,718 on July 1 - 125 days before Election Day. That timing is unusual enough that some analysts argue the post-2024 ETF era pulled the bottom forward: the spot funds, which began trading in January 2024, created a structural bid that did not exist in 2014, 2018, or 2022. The current drawdown of roughly 38% from the peak is also the mildest midterm-cycle decline on record, well below the shallowest historical slide.
The level that decides which story wins is $57,718, the July low, with $60,000 as the round-number line in the sand. As long as bitcoin holds above the July low, the early-bottom thesis stands and the midterm slump pattern has been structurally altered. If bitcoin falls back below $60,000 between November 16, 2026, and January 13, 2027 - the 13-to-71-day window after the election - the historical pattern reasserts itself and the next leg down opens toward the July low and potentially beyond.
That is the mechanism behind the headline "bitcoin could extend losses." It is not a prediction that prices must fall; it is a conditional map. The market has already priced in the hack - the $300 billion wipeout happened in the rear-view month - and it is now pricing in the political risk, which has a longer half-life.
The Second-Order Trade: What the Market Has Not Fully Priced
The first-order explanation for this selloff is obvious: a security scare plus a political setback plus a rotation out of risk. The second-order question is sharper, and the market has not settled it: what happens when the "Trump crypto trade" itself gets repriced?
The 2025 rally to $126,198 was not just a liquidity event. It was a policy trade - a bet that Washington would keep opening doors for the industry for years. The strategic bitcoin reserve, the stablecoin law, the lighter enforcement posture: each one was a signal that the state was moving from hostility to accommodation. A Congress controlled by the opposition party does not repeal those changes, but it can stall the next wave - the clearer securities framework, the bank-custody rules, the tax-code clarity that crypto firms say they need to scale. The market is now discounting a slower, more contested regulatory path.
Layer on top of that the unwinding of the AI trade that partly funded crypto's rise. Concern about future returns from artificial intelligence has pushed capital back into government bonds and safe-haven currencies as borrowing costs strain risk assets. Ten-year Treasury yields climbed back above 5% around the Federal Reserve's late-October meeting, where the central bank held rates steady and traders priced a more than 90% likelihood of no change. Higher real yields raise the hurdle rate for every speculative asset, bitcoin included, because they offer a competing, state-backed return with no custody risk and no hack risk.
Here is the transmission mechanism in one chain: the hack shocks custody confidence -> retail and institutional capital exits the largest exchange -> ETF flows turn negative as the marginal institutional buyer steps back -> the midterm result removes the expectation of accelerating deregulation -> the policy premium embedded in the 2025 high evaporates -> higher Treasury yields offer a cleaner alternative -> bitcoin drifts lower until it finds a buyer at a price that no longer assumes a friendly political path.
The uncomfortable implication: the hack is the trigger, but the repricing of political risk is the trend. Triggers fade; trends persist until the underlying assumption changes.
The Counter-Thesis: This Is the Bottom, Not the Top of the Slide
The strongest argument against the "extend losses" case is structural, and it deserves weight. The crypto market of 2026 is not the crypto market of 2014, 2018, or 2022. Spot bitcoin ETFs now channel regulated, tax-efficient demand from advisors and institutions that could not own the token directly before 2024. The United States has a strategic bitcoin reserve - an official acknowledgment that the asset has a place in national strategy. A federal stablecoin law gives the payments layer of the industry a legal footing it never had. None of these are reversed by a single election.
Nor is the Binance outflow a Lehman moment. Net withdrawals of $3.64 billion against $171 billion in assets is a confidence event, not a capital event - the exchange covered 95% of stolen funds from its own balance sheet. In 2022, the industry's failures were balance-sheet failures: leverage, commingled funds, insolvent lenders. This time, the loss was external, the venue remained solvent, and the asset itself was never in question. That distinction matters for how far contagion can travel.
There is also a near-term catalyst that could flip the flow. MSCI is scheduled to decide on November 11 whether to add Strategy Inc., the bitcoin-heavy holding company, to its indexes. Inclusion would force passive funds to buy exposure, creating a mechanical bid that has nothing to do with sentiment. Binance's own November 3 reserve report, if it shows deposits stabilizing or returning, would undercut the run-on narrative.
Even on a purely technical reading, bitcoin is not in free fall. It is up 1.69% over five days and 22.55% over three months. The 200-day average sits at $73,157 - only about 7% below the current price - and has acted as support through the year. A cyclical drawdown that finds support at the 200-day line and holds the July low is, by definition, a market that is consolidating rather than collapsing.
What to Watch: The Signals That Decide the Next Leg
The forward path splits into three scenarios, each with a trigger.
Base case - range-bound consolidation. Bitcoin oscillates between $73,000 and $82,000 through November and December, digesting the political repricing while the structural ETF bid prevents a breakdown. This requires the July low to hold, Binance outflows to normalize, and Treasury yields to stabilize below 5%. Probability-weighted, this is the most likely path: the market has already absorbed the hack, and the midterm shock is a one-day event looking for a multi-week narrative.
Downside case - the midterm pattern reasserts. A weekly close below $60,000, especially inside the November 16 to January 13 window, would confirm that the post-election slump is playing out on schedule. The next support sits at the July low of $57,718, and a break there opens a move toward the 200-day average and the psychological $50,000 level. The trigger to watch is a second consecutive monthly close below $60,000 - that would invalidate the early-bottom thesis and revive the historical 56%-73% midterm drawdown pattern.
Upside case - the policy floor holds. If MSCI includes Strategy on November 11, if Binance's reserve report shows net inflows returning, and if the Federal Reserve signals a more dovish path into 2027, bitcoin could reclaim the $82,000 resistance and challenge the $86,489 October peak. A decisive break above $86,489 would signal that the political repricing was overdone and that the structural bid is back in control.
Time horizons point in different directions, and that tension is the honest read. Short term - sentiment and liquidity dominate, and they are negative: hack fallout, ETF outflows, political uncertainty. Medium term - fundamentals are mixed: the regulatory pipeline has slowed, but it has not reversed, and the strategic reserve remains in place. Long term - the structural case is intact: ETF access, institutional custody, and a legal stablecoin framework are regime changes, not cyclical favors, and they do not self-reverse.
So the verdict is conditional, and the falsifying signal is explicit: if bitcoin closes below $57,718 on a weekly basis, or prints a second monthly close under $60,000 before mid-January, the "early bottom" thesis is wrong and the midterm slump pattern is back in force. Until then, the more probable read is a cyclical drawdown inside a structurally larger market - painful for traders who bought the 2025 high, but not yet a regime change.
The hack took $6 billion. The midterms may cost the market its policy premium. But the line that separates a cycle from a collapse is $57,718 - and bitcoin is still above it.
Explore more exclusive insights at nextfin.ai.
