Crypto looked to be finding its feet early in the week, but by Thursday the rug had been pulled out from under it once again. This time the trouble came from the stock market, where disappointing chip earnings and political worries (see below) had investors asking awkward questions of the AI trade, while a punchy jobs report prompted markets to brace for a rate hike next month. Today’s forward guidance looks at where support lies and why next week’s inflation print and December’s Fed meeting will set the tone for what comes next.
Meanwhile in Washington, the midterms delivered a blue wave that many anticipated, but that arguably exceeded the Democrats’ wildest expectations, and it’s thrown crypto’s political gameplan into disarray. The industry’s deep-pocketed PACs couldn’t save some of their most important allies, the CLARITY Act looks set to go back to square one, and Democrats are preparing to turn up the heat on the Trump family’s crypto ventures. It turns out money can’t buy you everything - not even a Senate seat in Ohio. Full story below.
Keeping your crypto safe sounds simple enough. You can leave it on an exchange and let someone else do the worrying, or move it into a wallet of your own and become your own bank. Easy, right?
Unfortunately, neither option is quite as safe as it looks, and each one asks you to trust something rather different. So, in today’s video, we break down what’s really behind an exchange balance, why proof of reserves only tells you part of the story, and the many ways self-custody can come unstuck, even when you do everything by the book. We also look at how to arrange your holdings so that no single slip can wipe you out. Just remember though, keeping the keys safe is only half the job…
Bitcoin is ending the week on the brink. It’s trading near $75k at the time of writing, within touching distance of the 50-week moving average. It began the week in the mid- to high-70s, meandering between $76k and $78k before the US midterms. A relief rally then pushed it above $81k as risk appetite briefly improved, only for the move to reverse violently on Thursday. More than $1bn was liquidated, most of it longs.
The trigger came from outside crypto. The Nasdaq fell 5.5% and the S&P 500 lost 4.36% as disappointing earnings from Qualcomm and Arm exposed how much of the AI trade rests on expectations that have run ahead of cash flow. The selloff wiped roughly $2.5 trillion from the Nasdaq’s market value. The political backdrop was arguably the bigger factor though. The Democrats won both chambers of Congress, and candidates opposed to new data centres won across the country. Most notably, Texas governor-elect Gina Hinojosa has called for an immediate moratorium on data centre development.
The technical picture is now pretty binary. BTC’s 50-week MA at $75,480 and the 200-day MA at about $73,200 form the last meaningful support band. The short-term holder cost basis sits at $75,700 and the True Market Mean at $77,700, so price is trapped between the average cost of recent buyers and the average cost of active investors. A sustained break below $73,000 would break the structure built in August and point to a longer consolidation, with the next major liquidation cluster down at $60k to $63k. A reclaim of $80k would ease the immediate pressure, while a move through $82k would put the large cluster of short liquidations near $87k in play.
Meanwhile, the macro backdrop has become less friendly. October payrolls came in at 165,000 jobs against expectations of about 65,000, and the unemployment rate fell to 4.1%. A resilient labour market makes it harder for the Fed to sound dovish, and markets are now pricing a roughly 78% chance of a quarter-point hike at the December meeting. October CPI on the 10th November is the next test. If inflation remains stubborn, the combination of tighter policy and an unwinding AI trade is a difficult backdrop for a high-beta asset like Bitcoin.
Regulation has also shifted from tailwind to headwind. Sherrod Brown won Ohio despite more than $63m spent against him by crypto-aligned groups, and Elizabeth Warren is likely to chair the Senate Banking Committee. The Clarity Act is dead in its current form, with prediction markets pricing only a 6% chance of a market structure bill passing before 2027. The new Congress does not convene until the 3rd January, so the next two months are likely to be dominated by oversight hearings, ethics investigations and positioning rather than compromise legislation. Divided government limits the worst outcomes for crypto, and the industry is far more embedded in traditional finance than in previous cycles, but the easy regulatory catalyst has gone.
The forward path is therefore a battle between a market that has already de-risked and a macro and political backdrop that is still getting harder. CPI on Tuesday and the December FOMC are the two scheduled events that can change the direction of travel. Between them, the regulatory headlines will do more to shape sentiment than any single data release. The key levels are clear: $73k on the downside, $80k on the upside and $87k if the shorts are forced to cover.
The US midterm elections this week saw Democrats seize control of both chambers of Congress.
While a Democratic victory (especially in the House) was widely expected, the sheer scale of the wave took most by surprise. Democrats took the Senate with a projected 54 seats, flipping many long-shot or Republican-leaning states such as Texas, Ohio, Kansas, South Carolina, and Iowa.
Whatever the political implications of these elections may be, the results unfortunately bring more uncertainty for the regulatory future of the crypto industry. Despite crypto PACs spending roughly $170 million backing pro-crypto candidates on both sides, several key Republican allies lost their races.
The biggest disappointment came from Ohio, where former Senator Sherrod Brown defeated Republican incumbent Jon Husted. For context, Brown is one of crypto's more vocal critics in Washington and was the target of one of Fairshake's largest spending campaigns. According to Federal Election Commission records, Fairshake affiliate Defend American Jobs spent roughly $56 million backing Husted and opposing Brown. Brown managed to win anyway. Meanwhile, crypto-friendly House Republicans Bryan Steil and Bill Huizenga also lost their seats.
On the bright side, this doesn't mean all that spending went to waste. According to Reuters' early tally, many of the races contested by Fairshake-backed candidates ended in victories. Stand With Crypto, the Coinbase-founded advocacy group, also stated that 27 of its 45 endorsed candidates had won their races. In other words, the industry still has a sizable number of allies in the next Congress. The problem is that this support is now spread across a Democrat-controlled legislature that gets to decide which crypto bills reach the floor.
So, why is that such a problem when crypto has spent years trying to build bipartisan support?
Well, somewhere in that process of building support, the industry’s broader political fortunes seem to have become closely tied to president Trump. There’s no denying that his administration has been the most supportive of crypto thus far, and that this support has helped regulators move towards a friendlier stance on digital assets. In many ways, it’s been exactly what the industry has wanted for years.
However, it’s also true that much of this support coincides with the Trump family building a lucrative business in the very industry his administration is helping regulate. Between World Liberty Financial and the TRUMP memecoin, the president and his family now have substantial financial interests in crypto. This has raised serious conflict-of-interest concerns among Democrats, who question whether the administration's crypto-friendly policies are also helping enrich the president and his family.
As a result, what should have been a bipartisan effort to establish regulatory clarity has become increasingly entangled with Trump's personal business interests.
This wasn't a minor sticking point during the CLARITY Act negotiations either. As we mentioned back in September, Democrats wanted restrictions on elected officials profiting from crypto ventures, while Republicans struggled to agree on the scope and enforcement of those restrictions. Now that Democrats are taking over Congress, the issue is unlikely to stay confined to negotiations over a bill.
In fact, Democratic lawmakers are already preparing to expand investigations into Trump's business dealings, with crypto expected to be one of the main areas of focus. Among the crypto ventures likely to face attention, the most obvious target is World Liberty Financial (WLFI), the ‘DeFi’ business associated with Trump's family.
For context, World Liberty's own disclosures show that a Trump-affiliated company owns approximately 38% of the business's holding company and is entitled to 75% of WLFI token sale proceeds after certain deductions. The same company and some Trump family members also hold a large allocation of WLFI tokens. So, while Trump and his family aren't listed as employees or officers of World Liberty, they nevertheless have a direct financial interest in the venture.
And this extends beyond the WLFI token. World Liberty also has USD1, a dollar-pegged stablecoin issued by BitGo. For context, USD1 was selected to settle Abu Dhabi-based MGX's $2 billion investment in Binance last year. That’s a significant deal for a new stablecoin, especially one associated with the sitting president's family. It also gave Democrats another reason to ask whether foreign investors and crypto businesses might be using commercial relationships with World Liberty to curry favour with the administration.
Those concerns have only grown since. In February, House Democrats called for an inquiry into reports of a separate UAE-linked investment in World Liberty ahead of US approvals for advanced AI-chip exports to the country. Then there's Trump's pardon of Binance founder Changpeng Zhao in October last year, after Binance had become an important venue for USD1.
Democrats have pointed to the sequence of events as a reason to examine the relationship between Binance, World Liberty and the administration. Binance has denied suggestions of a quid pro quo, while the White House has disputed allegations of improper dealings.
So, what changes once Democrats take control of Congress?
Well for starters, they gain the ability to push these inquiries further. Until now, most of the Democratic efforts have involved letters, requests for information and public hearings. Once they hold committee majorities in January, they can organise formal investigations and potentially issue subpoenas for documents and testimony.
In fact, last week, Senator Richard Blumenthal, the incoming chair of the Senate Permanent Subcommittee on Investigations, sent renewed demands to World Liberty, the company behind the TRUMP memecoin, Binance and Tether. He gave recipients until 4th January next year to provide outstanding records and warned that the subcommittee could consider other measures if they failed to cooperate.
Irrespective of the outcome of the investigation, this scrutiny will have several short-term implications for the projects and their stakeholders. Notably, the congressional scrutiny will understandably make exchanges, banks and other institutional counterparties more reluctant to work with these entities. The market will also tend to react more aggressively to the negative publicity.
Secondly, CLARITY. As some of you may remember, the Senate failed to advance the bill in September after both sides went into gridlock despite months of negotiations. With the change in majority, the Republican party’s bargaining position has weakened considerably.
Although there was a narrow chance for the existing Congress to revisit the bill before January, the Democratic sweep has made that prospect even less likely. After all, Democrats have little incentive to rush through a Republican-backed bill when they will soon have the power to negotiate on their own terms. And if CLARITY fails to pass before the new Congress takes office, the legislative process will have to start from scratch. In fact, House Democrats are reportedly discussing a different approach, built around Representative Maxine Waters' Crypto Investor and Consumer Bill of Rights.
For context, Waters introduced this as an amendment to CLARITY in 2025, although it never made it to a full House vote. According to the House Rules Committee's records, her proposal called for stronger custody safeguards, investor protections and regular proof-of-reserves reporting by crypto platforms.
The discussions now reportedly involve expanding that proposal into a broader market structure bill, with the SEC playing a bigger supervisory role and the CFTC getting a narrower one. Further ethics restrictions on federal officials are also said to be under consideration.
On the bright side, the failure of CLARITY doesn't mean all regulatory progress stops. In September, the SEC introduced its Innovation Exemption, allowing certain venues to trade tokenised US-listed stocks through onchain liquidity pools under specific conditions. The CFTC has also begun seeking public comment on a regulatory framework for certain leveraged retail crypto transactions. Both are examples of regulators moving ahead within their existing authority, without waiting for Congress.
Not to mention, the GENIUS Act's stablecoin framework has already been enacted. The Office of the Comptroller of the Currency published its final implementing rule in October, with the rule scheduled to take effect on 18th January 2027. That gives qualifying stablecoin businesses a statutory framework to work towards, regardless of whether a broader market structure bill passes.
While there's a limit to what regulators can achieve on their own, at the end of the day, the industry hasn't lost all its political allies, and the groundwork for bipartisan legislation hasn't disappeared. The problem is that the terms of any deal are now likely to look quite different from the ones crypto businesses were expecting. If you ask us, regulatory progress will probably continue through the agencies and the stablecoin framework, while a comprehensive market structure bill likely remains stuck in negotiations. Until we see whether Democrats and Republicans can agree on ethics and the SEC-CFTC split, that broader uncertainty isn't going away.
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