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An image of cryptocurrencies. /Yonhap

Major cryptocurrencies, including Bitcoin and Ethereum, are falling sharply alongside U.S. technology and artificial intelligence (AI) stocks. Concerns over tighter AI industry regulations following the U.S. midterm elections and growing risk aversion among institutional investors have spilled over into the cryptocurrency market. Large-scale forced liquidations of leveraged positions have further deepened the losses. Market participants are closely watching whether Bitcoin can hold the $75,000 level and whether U.S. stocks can stage a rebound.

According to U.S. cryptocurrency exchange Coinbase, Bitcoin was trading at $76,108 as of 12:10 p.m. Friday, down 5.38% from the previous day. The cryptocurrency had fallen as low as $75,586 at 8:20 a.m., a decline of 6.3%, before recovering above the $76,000 mark.

At the same time, Ethereum was trading at $2,241, down 7.6% from a day earlier, while XRP dropped 7.05% to $1.21 and Solana fell 6.25% to $90.

The immediate catalyst for the decline was a sharp sell-off in AI-related stocks on Wall Street. On Thursday, the tech-heavy Nasdaq Composite fell 5.52% from the previous session to close at 24,315. The Philadelphia Semiconductor Index plunged more than 12%. Nvidia shed more than 9%, while major semiconductor companies including AMD and Micron suffered double-digit losses, as selling pressure spread across the AI industry. 

The outcome of the U.S. midterm elections also weighed on investor sentiment toward technology stocks. With Democrats securing control of both the Senate and the House of Representatives, concerns have grown that regulations on AI data center construction and the expansion of power infrastructure could be tightened.

Local opposition to data center construction, along with concerns about electricity and water consumption, has emerged as a political issue, fueling speculation that large-scale AI infrastructure investments may not proceed as planned. Democrats' increased influence in Congress has also raised expectations of possible changes to the Trump administration's pro-cryptocurrency policies and its efforts to promote the AI industry.

These developments have also affected the cryptocurrency market. Bitcoin has recently tended to move alongside shares of cryptocurrency mining companies that are expanding into AI data center operations. The connection between the two industries has strengthened as some mining companies repurpose their existing mining facilities and power infrastructure for AI data centers.

Concerns about slowing AI infrastructure investment could therefore weaken expectations for the business valuations and profitability of mining companies. Analysts say cryptocurrencies have also come under selling pressure as investors increasingly move away from riskier assets.

Signs of capital outflows are also emerging within the cryptocurrency market. U.S. spot Bitcoin exchange-traded funds (ETFs) recorded net outflows of $398.6 million on Nov. 2 and $115.6 million on Nov. 3. 

Large-scale liquidations in derivatives markets have added to the downward pressure on prices. According to CoinDesk, citing data from CoinGlass, more than $1 billion in leveraged cryptocurrency positions were forcibly liquidated over a 24-hour period as of Nov. 5. 

U.S. monetary policy is another major factor expected to influence the market. Recently, Federal Reserve officials have expressed concerns that inflationary pressures remain above the central bank's target.

Beth Hammack, president of the Federal Reserve Bank of Cleveland, and Thomas Barkin, president of the Federal Reserve Bank of Richmond, have both expressed support for gradual interest rate increases to bring inflation under control. Although the Fed held its benchmark interest rate steady at 3.75%–4.00% last week, the possibility of further monetary tightening continues to weigh on risk assets such as cryptocurrencies. 

Experts remain divided over the medium- to long-term price outlook.

Joshua Lim, global co-head of markets at FalconX, told CoinDesk that fresh selling pressure was emerging as investors began pricing in the implications of a potential slowdown in data center construction.

He also described the cryptocurrency market's rebound immediately following the midterm elections as largely a relief rally driven by short covering, given that the election results had been widely anticipated.

By contrast, some analysts believe the recent price declines do not necessarily undermine the cryptocurrency market's medium- to long-term growth prospects.

Jasper De Maere, a trader at Wintermute, said, "Let's see where we land in the short term here; medium term still glass half full." 

Looking ahead, Bitcoin's ability to hold the $75,000 level is expected to be a key turning point for prices. With the cryptocurrency trading close to that threshold, further declines could increase psychological pressure on investors.

If the downturn continues, Bitcoin could face a deeper correction toward the $62,000 range. Conversely, analysts say that a recovery above its 30-day moving average of $81,319 could pave the way for a rebound past $84,800.

                                                                                                                Kim Min-ju