On Nov. 5 (U.S. time), Bitcoin fell more than 6% at one point during the day, down to $75,463. That is its lowest price since Sept. 16. The same day, the Nasdaq, an index heavy with tech stocks, dropped 4.2%.
It is easy to assume that bad news hit the crypto market. But Bitcoin fell together with stocks as soon as U.S. markets opened, and the market traced the selloff to AI stocks, not crypto.
But the real point lies elsewhere. Despite its nickname "digital gold," Bitcoin moved in the same direction as the Nasdaq that day.
- Why did AI stocks plunge that day?
It started with the U.S. midterm elections. After Democrats won both the House and the Senate, stocks rose first, right after the vote. But on Nov. 5, worries grew that Democratic policies could be less friendly to the AI industry, and investors pulled money out of tech stocks.
The S&P 500 fell 2.7% and the Nasdaq fell 4.2%. The Nasdaq sank to its lowest level since July 29. Bitcoin fell more than 6% at one point that same day.
Put simply, stocks and crypto handed back together the gains the election had given them.
- Why was Bitcoin sold along with them?
Two facts are clear from that day. Investors pulled money out of tech stocks, and Bitcoin fell together with stocks as soon as U.S. markets opened.
When markets get nervous, investors tend to cut everything risky at once rather than judge each asset one by one. It is like trimming a grocery budget: everything in the snack aisle goes back on the shelf together. Gold is different, though. "Digital gold" was supposed to mean the opposite: something people buy when they are anxious.
That day, Bitcoin was on the selling side, not the buying side. The sequence: AI stocks fell → investors pulled money out of tech stocks → Bitcoin fell at the same time.
- Why did the drop run deeper than stocks?
What deepened the drop was the forced liquidation of leveraged positions (bets much larger than the cash you hold, made with borrowed money). In the first hour after U.S. markets opened alone, about $500 million in positions were liquidated in the crypto market, and the 24-hour total came close to $850 million at the time of writing.
Say you put up KRW 1 million of your own money as margin (collateral) and bought KRW 20 million of Bitcoin at 20x leverage. If the price falls just 5%, the loss reaches KRW 1 million and your margin is gone. Then the exchange sells that position into the market by force. That day, the intraday drop topped 6%.
Forced sales push the price down further, and that decline triggers the liquidation of the next position. Bitcoin also briefly slipped below its 50-week moving average (the average price over the past 50 weeks, $75,733) that day.
- Why did "digital gold" not hold up that day?
A gold-like safe haven should fall less, or even rise, on days when stocks drop. That day Bitcoin moved the same way as the Nasdaq, and fell even more during the trading day.
Economist Mohamed El-Erian asked that day whether "the change in Congress will really slow down tech companies," and said this kind of move was not surprising. On a day when doubts about tech stocks grew, Bitcoin fell too.
- What happens when a similar day comes?
Jordan Watson, a portfolio manager at Tandem Investment Advisors (a U.S. asset manager), said volatility could rise as investors digest the election results and their policy effects. In his view, a post-election rise in stocks should not be taken as a signal that it is now safe to relax.
There is precedent too. Crypto analyst Rekt Capital said Bitcoin's current pattern resembles May. Back then Bitcoin fell to $57,000 by late June. This time, though, it is clear the decline started with AI stocks. That means Bitcoin's path is tied directly to whether tech stocks recover.
- BITPRESS Insight
Bitcoin's drop that day was less an event in the crypto market than an extension of one in the stock market. When AI stocks fell, investors pulled money out of tech stocks and Bitcoin fell too. Forced closing of borrowed positions appears to have made the drop larger than the drop in stocks.
If you held KRW 10 million of Bitcoin as an "asset that holds up when stocks fall," you would have been down more than KRW 600,000 at the point of the 6%-plus intraday drop. For someone who expected a safe haven, the loss came on top of a failed hope.
Whether Bitcoin is a safe haven when stocks fall is answered not by the "digital gold" nickname but by which way Bitcoin actually moved on a day stocks plunged.
Sources
https://cointelegraph.com/markets/bitcoin-price-crashes-7-week-low-stocks-election-gains
Glossary
Leveraged position — An investment sized several times larger than the cash you hold, using borrowed money, so a small move against you means a big loss.
Forced liquidation — When losses exceed your margin, the exchange sells your position on your behalf to close it out.
Margin — Your own money posted as collateral when you make a leveraged investment.
50-week moving average — A line tracing the average price over the past 50 weeks, which many investors use as a benchmark for the trend.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
