Why is Bitcoin falling below $76,000 as NASDAQ slides 5% in AI-led sell-off?

• Regulatory worries over crypto and AI weigh on Bitcoin, which drops 5% to below $76,000 and wipes out its post-midterm gains.
• With crypto liquidations exceeding $1 billion, Ethereum, Solana and XRP each lose more than 6%.
• A sell-off in AI-related shares drags NASDAQ down 5% and S&P 500 down 3.5%.

Selling pressure hit Bitcoin (BTC) and the broader crypto market at the US market opening on Thursday. Concerns that Democrats' control of both chambers of the US Congress could bring tighter crypto and AI regulations weighed on AI-related shares, pulling the NASDAQ Composite (IXIC) as much as 5% lower.

Why is Bitcoin falling with tech stocks?

Wednesday's post-midterm election rally was unwound as Bitcoin slipped below $76,000, losing more than 5% over the past 24 hours. A 4.5% contraction left the broader crypto market capitalisation at $2.71 trillion, while Ethereum (ETH), XRP and Solana (SOL) each shed more than 6%.

Nearly $900 million in crypto futures positions have been liquidated over the past four hours following the sell-off. Total liquidations over the past 24 hours consequently reached $1.08 billion, with nearly $953 million coming from long positions.

US markets opened as cryptocurrencies declined and liquidations mounted. Initial losses of 5% in the tech-heavy NASDAQ and 3.5% in the S&P 500 have since been followed by a modest recovery. Semiconductor and AI-related shares bore particularly heavy losses, sending the Semiconductor Index (SOX) down 10%. Nvidia (NVDA), Advanced Micro Devices (AMD) and Qualcomm (QCOM) accounted for most of that decline.

Behind the sell-off are concerns that Democrats' control of the House and Senate after Tuesday's midterm elections could result in stricter regulation of crypto and AI.

Previous reporting indicated that a new crypto market structure bill being drafted by Democrats could give the SEC greater oversight of crypto and curb the CFTC's influence. Democrats also plan tougher ethics measures governing political officeholders' involvement with crypto.

Market participants linked the equity sell-off to Democrats' resistance to the AI sector's rapid expansion.

In a post on X on Wednesday, Rep. Yassamin Ansari said Democrats in the new Congress should prioritise a pause in advanced AI development and impose a "ban on artificial superintelligence."

The reaction in crypto markets also underscores the strengthening correlation between cryptocurrencies and tech shares, especially AI-related equities.