Everything About AI
NextFin News - Bitcoin fell below $76,000 on Thursday as a rout in artificial-intelligence stocks swept through global markets, wiping out more than $1 billion in leveraged crypto bets in 24 hours and erasing a post-election rebound that had pushed the token above $80,000 only a day earlier. The selloff laid bare how tightly crypto is now tied to the same crowded, leverage-fueled trade that carried Wall Street's AI darlings higher - and how fast that linkage reverses when the narrative breaks.
The Move: A Post-Election Rally Reversed in a Single Session
The reversal was swift and nearly total. Bitcoin, the largest cryptocurrency, slid to about $76,500, down nearly 5% and back near the levels seen before Wednesday's breakout above $80,000. Ethereum shed more than 5%, and roughly 90% of the top 100 tokens finished the session in the red. More than $1 billion in crypto derivatives positions were liquidated over the past 24 hours, according to CoinGlass, with most of the forced selling coming from bullish bets. Roughly $428 million of long positions alone were wiped out within a single hour.
That liquidation wave was the largest since at least Oct. 28-29, when bitcoin tumbled from nearly $82,000 to $76,000 - a useful reminder that the market was already testing this exact price zone less than two weeks ago. The difference this time is the trigger. The late-October flush was a crypto-native event. Thursday's was imported from Wall Street.
The trigger sat squarely in U.S. equities, not crypto. The Nasdaq Composite sank nearly 6%, on track for its worst session since the tariff shock of April 2025, while a chip-sector index plunged more than 10% in early trading. Nvidia fell more than 6%, Micron Technology dropped over 12%, and Advanced Micro Devices lost more than 13%. By late morning the S&P 500 had given up about 2.6%, and the Nasdaq was more than 10% below its record high, putting the index in correction territory. The Dow Jones Industrial Average also headed for its worst second session after a midterm election in data going back to 1896.
Crypto's most AI-exposed corners fell hardest. Digital-asset-related stocks sank more than 10%, and crypto miners - many of which have been pivoting hash-power capacity toward AI computing - tumbled 15% to 20%. Strategy (MSTR), Coinbase (COIN) and Circle (CRCL) were all caught in the downdraft. The pattern is the tell: the assets that trade most like AI-infrastructure proxies fell the most, while the broader crypto market was dragged down by the correlation, not by any crypto-specific shock.
There is no exchange failure, no regulatory crackdown, no protocol exploit. The damage was mechanical - a crowded long trade, built up into the election, unwinding through forced selling once the AI narrative cracked.
The Transmission Channel: Why AI Stocks Now Pull Crypto Down
The mechanism is not mysterious, but it is often misread. Bitcoin is no longer a niche asset trading on its own four-year halving calendar. It has become a high-beta proxy for the same global risk appetite that drives long-duration growth stocks. When the discount rate on future earnings compresses, both AI equities and crypto tend to rise together; when investors demand a higher premium for duration risk, both fall. The correlation is the message.
The immediate channel ran through positioning. Crypto derivatives open interest had built up into the election, and funding rates on perpetual swaps had turned positive as traders leaned long. That setup works in one direction: a push higher forces shorts to cover, which pushes price higher still. It works even faster in reverse. Once bitcoin slipped back under $80,000, long liquidations kicked in, and the cascade - more than $1 billion in 24 hours - did the rest.
The second channel is the shared narrative. For the better part of two years, bitcoin and artificial intelligence have been marketed as the two great disruptions of the decade, and both have been financed by the same pool of speculative capital chasing "this time is different" stories. When faith in AI's capital-spending boom wavers, the collateral damage spreads to any asset whose valuation rests on a similar promise of exponential growth. Crypto miners make the link literal: they are no longer pure bitcoin proxies but hybrid AI-infrastructure plays, so they get hit twice - once as technology names, once as crypto names.
Wednesday's rally, analysts noted, had been fueled partly by short covering rather than a comparable influx of new buyers. Futures data pointed to repositioning, not fresh demand. That matters because a bounce built on shorts exiting is inherently fragile: once the covering is done, there is no new buying left to hold the level. Thursday proved the point.
The sequence is worth spelling out because it explains the violence of the reversal. On Tuesday, bitcoin dipped as low as roughly $75,600 in the hour after the midterm results came in, as traders priced in a Democratic sweep. By Wednesday morning it had clawed back above $80,000 - a 7.3% climb from low to high on hourly data - as short sellers were squeezed. That rebound looked like strength on the chart. In reality, it was a positioning event: shorts covering, not buyers arriving. When AI equities cracked on Thursday, there was no new demand waiting underneath, and the $428 million in longs liquidated within the hour was the bill for that illusion.
The Midterm Shock: A Political Risk Layered Onto an AI Valuation Problem
The selloff did not start with earnings. It started with politics. Democratic gains in the midterm elections - including wins at the governor's level in Texas and Georgia, which together account for roughly a third of all AI data-center spending and projects - raised the prospect of a more restrictive environment for data-center development: permitting, power allocation, and local opposition.
That prospect landed on a sector already showing cracks. In the second quarter of 2026 alone, at least 45 data-center projects worth $68 billion were disrupted by local opposition, according to Data Center Watch. Evercore ISI analysts, led by Amit Daryanani, warned that a more restrictive data-center development environment "could create incrementally more negative sentiment for AI infrastructure exposed names." The concern is not abstract - it is a ledger of delayed projects and rising costs.
Carlos Guzman, vice president of research at GSR, put the chain plainly: "The midterms appear to have triggered this sell-off, with investors worried that greater opposition to data-centre expansion could slow the AI buildout. This has added to concerns about the returns on AI spending that were already building." He noted that disappointing earnings from chipmakers had added to the pressure.
The deeper issue is the return on capital. For months, a quiet but growing question has circulated through institutional research: will the hundreds of billions flowing into AI infrastructure ever earn their keep? A Saxo strategist, Chanana, said a tighter regulatory environment could make investors more demanding about the funding and profitability of AI infrastructure, shifting focus from companies expanding capacity to those demonstrating meaningful returns. Upcoming corporate earnings, including Nvidia's results, would provide a more meaningful test of the AI investment outlook.
This is the second-order effect that most coverage missed. The trade was never just "AI stocks down, crypto down." It was a repricing of the entire capital-spending supercycle that has propped up chipmakers, utilities, data-center REITs, copper, and the crypto miners that rent out GPU capacity on the side. When the marginal dollar of AI capex looks less certain, every asset that priced in its arrival has to re-underwrite its thesis.
The Counter-Thesis: A Leverage Flush, Not a Regime Change
The strongest case against reading too much into Thursday is that the damage looks mechanical rather than fundamental. Jasper De Maere of Wintermute cautioned against treating a single day's selloff as a verdict. Crypto held up relatively well amid the turmoil in AI stocks, he said, while broader adoption continues to strengthen the longer-term outlook.
"Let's see where we land in the short term here, medium term still glass half full," De Maere said. With correlations across assets running high, he added, investors should "keep an eye out for bargains surfacing over time."
There is evidence for that read. The liquidation wave cleared out weak hands without any crypto-specific shock. Bitcoin's drop to $76,000 left it holding a level it had already tested and defended in late October, and the market absorbed that earlier episode without a lasting breakdown. Guzman's own framing points the same way: "We had a relief rally yesterday that seemed to be happening on optimism about the geopolitical situation due to the midterm results. The situation appears to have flipped today with a pullback in risk appetite amplified by leverage." Note the final five words. Leverage amplifies both directions; it does not change the underlying thesis.
History also cuts in favor of the cyclical read. Crypto's largest drawdowns - 2018, 2022 - were driven by structural breaks: leverage platforms collapsing, a reserve-currency stablecoin failing, a central bank hiking into a liquidity crisis. A single-day AI-driven risk-off flush, by contrast, is the kind of event the market digests quickly once the forced selling exhausts itself. The $1 billion liquidation, while the largest in two weeks, is modest relative to the multi-billion-dollar flushes that marked genuine crypto crises.
The Bear Case That Cannot Be Dismissed
But the cyclical reading has a real vulnerability, and it is the one De Maere's optimism must answer. If the AI buildout genuinely slows - if data-center projects keep getting delayed, if power constraints bite, if capex guidance gets cut - then the earnings that justify today's valuations do not arrive, and the "leverage flush" becomes a fundamentals repricing. That is the scenario the midterm results made more plausible, and it is why this selloff cuts deeper than a typical long squeeze.
The falsifying signal is specific and observable: watch the next wave of AI infrastructure earnings and capital-spending guidance. If hyperscalers and chipmakers hold or raise capex plans despite the political headwind, the cyclical-leverage thesis holds, and the flush is a buying opportunity. If they cut guidance or flag material project delays tied to permitting or power, the structural concern takes over - and bitcoin's elevated correlation to AI equities means crypto would likely follow lower rather than rebound.
There is also a second falsifying signal on the crypto side: funding rates and open interest. If funding stays neutral or negative while price stabilizes, the leverage has been cleared and the market can heal. If funding flips back deeply positive on a bounce while open interest rebuilds, the same fragility is being reloaded - and the next AI wobble will produce the same flush.
What Comes Next: Three Horizons, Three Scenarios
The near-term path runs through two catalysts. First, the AI earnings cycle: guidance from the chipmakers and hyperscalers will determine whether Thursday was a positioning event or the start of a slower AI-spending regime. Second, bitcoin's own technicals: a sustained break back above $80,000 would signal that the election bounce is still alive; a failure to reclaim it after a liquidation flush would suggest the risk-off tone has more room to run.
Short term (sentiment and liquidity): the market is in a liquidity-driven drawdown - forced selling, high cross-asset correlation, and a crowded trade unwinding. Volatility stays elevated until the liquidation cascade exhausts itself and funding rates normalize.
Medium term (fundamentals): the question is whether AI capital spending survives the political and power constraints now being priced in. This is where the midterm outcome matters most - not as a one-day headline, but as a slower drag on project economics.
Long term (structure): De Maere's "glass half full" read rests on adoption continuing to strengthen - a claim that does not depend on any single quarter of AI capex. If institutional adoption and real-world usage keep compounding, the AI correlation becomes a cyclical overlay rather than a structural anchor.
The base case is that volatility stays elevated but the crypto market digests the flush and stabilizes near current levels as attention shifts to earnings. The upside case is that AI spending guidance holds, risk appetite returns, and bitcoin reclaims the $80,000 handle. The downside case is that capex cuts confirm the slowdown, and the AI-crypto correlation drags both lower together.
Thursday's selloff was a leverage story wearing an AI mask - and the difference matters. If the AI buildout survives the political and power headwinds, crypto's recovery is a matter of when, not if. If it does not, the "glass half full" optimism will meet a much harder test than a single bad day.
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