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(Bloomberg) -- Bitcoin edged back into the green after a bruising selloff on Thursday swept through cryptocurrencies and other risky assets, pressured by lackluster chipmaker earnings and a Democratic sweep of Congress.
The largest cryptocurrency was trading at around $76,000 on Friday morning in New York, having tumbled almost 6% from a position above $80,000 a day earlier. Smaller cryptocurrencies were also broadly up on Friday, with BNB, ZCash and HYPE all trading up between 1 and 3%.
The S&P 500 recorded its steepest drop in more than a year on Thursday as investors forecast a Democrat-led clampdown on data center expansion, pushing chipmaker stocks lower. Futures for the benchmark and the tech-heavy Nasdaq 100 crept up on Friday, helping to bolster trader optimism that spilled into crypto bets.
"Bitcoin appears to be finding some relief after yesterday's sharp selloff, although I would be cautious about calling this a reversal just yet," Dean Chen, an analyst at crypto exchange Bitunix, said in an email. "I would describe the current move as selling pressure easing, rather than fresh accumulation taking hold."
Crypto remains on shaky ground after a $6.3 billion hack on digital-asset exchange Binance Holdings Ltd. rocked the sector on Oct. 29, dampening investor enthusiasm for the asset class. Volatility in the broader market has only worsened the blow, with routs in artificial intelligence stocks spilling over to crypto as a result of many of the industry's mining companies pivoting to the AI industry in recent years.
"The selloff reflects growing doubts over the returns from huge AI spending, fears that tighter regulation could slow data-center construction and a broader retreat from highly valued growth assets," said Axel Rudolph, chief technical analyst at IG. "Yet with stock markets continuing to slide, Bitcoin is so far holding its ground, suggesting buyers are stepping in to defend current levels. That relative strength could be an important test of whether Bitcoin is starting to decouple from the technology trade, rather than simply following it lower."
Spot Bitcoin exchange-traded funds in the US recorded $430 million in outflows on Thursday, data compiled by Bloomberg show. The Fidelity Wise Origin Bitcoin Fund led the pack with about $200 million of that figure, followed by BlackRock Inc.'s IBIT with about $105 million in outflows.
"The selling does seem to be easing, but the recent bounce looks more like brief relief than sustained recovery," said Samuel Leyne, co-head of crypto trading at Marex.
"You need a real catalyst to bring confidence back, whether that's geopolitics cooling off, oil coming down or the macro picture improving," he added. "Until then, we have to watch stocks, ETF flows and the basis levels. Bitcoin needs to get back above $77,000 to build any momentum, and if equities keep sliding, $75,000 is right back in play."
