Bitcoin Swings as Democratic Sweep Rattles Crypto Markets and ETF Flows

Bitcoin plunged to a seven-week low near $75,600 in Asian trading hours Wednesday before staging a sharp recovery, as Democrats won control of both the House and Senate in the U.S. midterm elections. The initial sell-off reflected investor concern that a unified Democratic Congress would slow the pro-crypto agenda championed by the White House, while a broader relief rally followed once political uncertainty began to clear.

By mid-morning in New York, Bitcoin turned higher, trading near $78,500, up roughly 0.9% on the day after erasing a loss of as much as 2.8%. The recovery mirrored a rebound in U.S. equity futures, as early anxiety over Democratic control of Congress gave way to broader confidence in the domestic economy.

ETF Outflows Top $1 Billion Across Two Sessions

Sentiment remained fragile heading into the session, weighed down by significant institutional withdrawals from spot Bitcoin exchange-traded funds. U.S. spot Bitcoin ETFs recorded net outflows of $398.6 million on November 2, following $643.2 million in withdrawals on October 30, pushing combined two-session outflows to more than $1 billion, according to CNBC TV18. Stablecoin supply also contracted, with the circulating market value of dollar-pegged stablecoins falling $5.55 billion, or 1.84%, to $296.01 billion between October 27 and November 3.

On the legislative front, analysts flagged the Democratic sweep as a complicating factor for pending crypto regulation. The CLARITY Act, a key digital-asset market-structure bill, had already stalled 49 to 50 in the Senate in September, and analysts at CoinDesk noted that a shift in congressional control changes the terms of any potential 2027 compromise. DeFi tokens bucked the cautious mood, with CoinDesk's DeFi Select Index rising roughly 5% on the day, led by a 6.2% gain in Injective. Traders now look to Friday's nonfarm payrolls report as the next major macro catalyst.