Bitcoin wipes out post‑election rally as Wall Street sell‑off forces $1 bn in crypto liquidations
Bitcoin fell 6% to $75,700 after a Nasdaq slump erased post‑election gains, sparking over $1 bn in crypto liquidations.
According to The Block, Bitcoin slipped 6% to $75,700 and Ether dropped 7% after a sharp Nasdaq decline turned the market into a risk‑off environment. The equity tumble triggered more than $1.03 billion in crypto liquidations, wiping out the gains many investors enjoyed following the recent election.
What happened
The Nasdaq Composite plunged, pulling down technology‑heavy stocks and dragging the broader market into a sell‑off. Bitcoin, which had been riding a modest post‑election rally, fell 6% to $75,700, while Ether, the second‑largest cryptocurrency, slid 7%. The price drop set off a cascade of margin calls on leveraged positions across futures, perpetual swaps, and other derivatives, resulting in liquidations that exceeded $1 billion. Traders who had borrowed against their crypto holdings to amplify exposure were forced to close positions as collateral values fell below required thresholds.
Why it works that way
Crypto markets are still relatively young, and a large share of daily volume comes from leveraged trading. When a trader opens a leveraged position, they must post collateral—usually the underlying crypto. If the market moves against them, the platform automatically sells the collateral to protect the lender. This process is called a liquidation. Because many traders use similar leverage ratios, a single price shock can generate enough forced sales to push the price lower, creating a feedback loop.
The link between equities and crypto is not structural; it is driven by sentiment and shared funding sources. A Nasdaq sell‑off signals a broader risk‑off mood among investors who suddenly prefer cash or government bonds. Those investors often have exposure to crypto through the same margin accounts or institutional funds that rebalance across asset classes. When equity prices tumble, those funds may need to free up capital, and the quickest way is to unwind crypto positions. The resulting sell pressure amplifies the price decline, which then triggers more liquidations.
Another factor is the prevalence of stablecoin borrowing. Stablecoins are pegged to the US dollar and are widely used as loan currency in crypto markets. A drop in Bitcoin or Ether reduces the value of the collateral backing those loans, prompting lenders to call in the debt. Borrowers who cannot meet the call must sell crypto, adding further downward pressure.
What changes because of it
The immediate effect is a reset of the post‑election bullish narrative for Bitcoin and Ether. Investors who entered the market expecting a continuation of gains now face a steeper entry point. The $1 bn in liquidations also means that a sizable amount of leveraged capital has been removed from the system, which could reduce short‑term volatility but also limit upside potential until new margin is supplied.
Long‑term holders of Bitcoin and Ether who are not leveraged are largely insulated from the liquidation cascade; their positions simply sit at a lower price. However, the event highlights the vulnerability of traders who rely heavily on leverage. Institutions that provide crypto exposure through funds or custody services may see client withdrawals if the risk‑off mood persists, potentially prompting them to tighten credit terms.
The broader market now has a clearer view of how tightly crypto price action can be tied to equity sentiment. If Wall Street continues to experience turbulence—whether from upcoming earnings, policy shifts, or geopolitical news—crypto could see repeated bouts of forced selling. Conversely, a rebound in equity markets could restore confidence and attract fresh capital, but only after the liquidation backlog has been cleared.
What to watch next are three interrelated signals: first, the level of open interest in crypto derivatives, which shows how much leverage remains in the system; second, any shifts in stablecoin supply, because a sudden contraction often precedes collateral squeezes; and third, the direction of major equity indices, especially the Nasdaq, as they continue to set the risk tone for cross‑asset investors. For holders who are not actively trading on margin, the price dip may simply be a buying opportunity, but for anyone with leveraged exposure, the episode serves as a reminder that crypto does not exist in a vacuum.
