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LONDON/HONG KONG, Nov 4 (Reuters) - Cryptocurrencies recovered on Wednesday from overnight losses triggered by the Democrats winning control of both houses of the US Congress in the midterm elections, a potential blow to an industry that has sought faster deregulation for digital assets.
While Republican US President Donald Trump has been the most high-profile advocate of reduced regulation, some Democrats have also backed a light-touch approach.
The crypto sector spent more than $300 million backing crypto-friendly Democrat and Republican politicians in roughly equal measure during the current and previous election cycles.
Bitcoin briefly touched a six-week low before recovering to trade up 0.7% on the day by 0841 GMT at $78,354, following a reversal in the stock market, where US index futures were up 0.3%, having fallen as much as 2% at one point overnight. Ether gained 1.4% to trade at $2,323.
Bitcoin has fallen by around 41% since hitting record highs above $122,000 in October 2025, bringing the value of the broader crypto market to around $2.61 trillion, according to CoinMarketCap.
Smaller tokens such as sol, dogecoin and ada were up between 1.6% and 2.2% on Wednesday, but all three have lost nearly a quarter of their value over the last month, according to crypto website CoinGecko.
WIDER CONCERNS ABOUT HACKS AND AI
The overall crypto market has lost some $300 billion in value in the last month, as deepening concern about future returns from AI and the strain of rising borrowing costs pushed investors into less risky assets such as government bonds and safe-haven currencies.
Investors took $215 million out of the largest bitcoin-backed exchange traded funds in October, bringing the year-to-date outflow to $1.84 billion, according to LSEG/Lipper data.
Sentiment has also been hurt by the $6 billion hack of the Binance platform last week, the largest heist in crypto history, which triggered the largest net weekly outflow from bitcoin ETFs since early July, worth $884 million, according to the data.
On Tuesday, Binance customers had withdrawn a net $4.72 billion from the world's largest cryptocurrency exchange since it reopened at the weekend following the hack.
"The market may be re-evaluating the risk-reward profile of crypto assets. On one hand, the string of security incidents is forcing investors to re-examine the industry's security infrastructure and custody risks," Tim Sun, senior researcher at HashKey, said.
"On the other hand, potential shifts in the US political landscape could stall the progress of structural crypto legislation and institutional framework development. All of these factors leave the crypto market facing strong headwinds," he said.
Trump, who said he would make the United States the "crypto capital of the world" during his 2024 presidential campaign, has made his own forays into digital assets, with ventures including the launch of his "Trump" meme coin, plus his family's World Liberty Financial crypto platform.
In the almost two years since his return to office, Trump has introduced lighter enforcement and the creation of a strategic bitcoin reserve.
Washington has also allowed for easier access to banking and exchange-traded products and passed a federal stablecoin law that could help these assets move into the mainstream payments and money transfer systems.
(Reporting by Amanda Cooper in London and Jiaxing Li in Hong Kong; editing by Barbara Lewis)
