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Markets swung from shock to relief after Democrats swept Congress in the US midterms. Bitcoin fell below $76,000 before rebounding near $78,000, while Asian stocks and the dollar both reversed early losses. The same AI-spending fears now complicate crypto's CLARITY Act and have rattled Wall Street and Europe overnight.

Some stories in Kaupr Daily:

💎 Bitcoin's drop to a seven-week low didn't last — it was back near $78,000 within hours.

💎 Crypto's CLARITY Act just got harder to pass now that Democrats control the committees that decide its fate.

💎 Prediction markets traded over $1.4 billion on Kalshi alone, with the Democratic sweep priced in at well above 70% odds before results came in.

💎 Prediction markets had already called the Democratic sweep before the first results came in.

— Morten

Bitcoin dropped below $76,000 early Wednesday as Democrats were projected to win both chambers of Congress, then rebounded to trade near $78,000 within hours. Options traders moved in heavily around the result, and analysts pointed to the shift as uncertainty fading rather than the outcome itself driving the recovery.

Why it matters: Resistance now sits at $80,000–$82,000, and analysts say holding above $78,000 while ETF investors keep selling would signal other buyers are stepping in.

Source: Bitcoin knocks on $78,000 in V-shaped comeback as midterm election uncertainty fades — CoinDesk

Update: Fundstrat's Tom Lee argued the sell-off isn't actually bearish for crypto — Trump retains veto power, Democrats are likely to turn pro-data-center once in office, and markets historically rally after midterms. — @AltcoinDaily

The Associated Press projected Democrats have won the US House, adding to their Senate win and giving the party control of the Financial Services and Agriculture committees that oversee crypto's CLARITY Act. The bill remains stalled after a failed Senate cloture vote in September, and committee chairs now decide which proposals get hearings.

Why it matters: Democratic leaders Maxine Waters and Elizabeth Warren have already pushed the SEC for records on Trump family crypto dealings — committee control gives them the power to set hearings on it directly.

Source: Democrats Win U.S. House, Strengthen Crypto Legislative Influence — The Defiant (via KuCoin)

US stock futures traded mixed early Wednesday as investors weighed the Democratic sweep of Congress and several governorship wins, including Texas, where Democrat Gina Hinojosa has pledged a moratorium on data centers. Big Tech names were mixed, with Nvidia up and Tesla and SpaceX both down sharply.

Why it matters: Ameriprise's Anthony Saglimbene said the real question is what Democratic governorships mean for the data-center buildout, already under scrutiny over hyperscaler capital spending.

Source: Stock market today: live updates — CNBC

Asian stocks sold off early Wednesday as the Democratic sweep raised fears for AI spending, before erasing losses in the afternoon. Japan's Nikkei and Taiwan's Taiex stayed lower, but South Korea's Kospi turned positive and Hong Kong and Shanghai both climbed as investors reassessed their initial reaction.

Why it matters: UBS's Mark Haefele said the vote should matter less for markets going forward than fundamentals like AI investment, earnings and interest rates.

Source: Asia Markets Get Midterm Whiplash as Selloff Gives Way to Relief Rally — Dow Jones Newswires (via Morningstar)

The US Dollar Index fell to its lowest level since late September as early results pointed to Democrats controlling both chambers, raising expectations of legislative gridlock that would cap government spending. Safe-haven buying dragged Treasury yields lower too, though hawkish Fed rate-hike bets limited the dollar's losses.

Why it matters: Traders are pricing in a more than 75% chance the Fed raises rates again in December, a bet reinforced by Tuesday's stronger-than-expected JOLTS job openings data.

Source: US Dollar Index (DXY) dives to late September lows near 101.25 on US election results — FXStreet

Gold climbed as the dollar fell on the Democratic sweep, while oil rebounded from a pullback tied to optimism over talks to end the wars in Iran and Ukraine. Analysts said gold's gain came despite a backdrop of higher rates, pointing to genuine safe-haven demand rather than just dollar weakness.

Why it matters: ING analysts warned that any real progress in the Iran peace talks would still mean more downside for oil prices.

Source: Oil Prices Rise And Gold Gains 2% On US Midterm Election Results — Forbes Middle East

Global stocks slumped and the dollar hit a one-month low as the Democratic sweep stoked fears that tighter tech regulation could slow AI spending. Chipmakers Samsung, SK Hynix and TSMC fell sharply in Asia before paring losses, while Treasuries rallied on expectations that political gridlock would curb government spending.

Why it matters: Mirae Asset's Kim Seok-hwan warned that a Texas moratorium on data centers, like the one already in New York, could delay projects in one of the fastest-growing US computing markets.

Source: Stocks, dollar slide as stunning victories for Democrats jolt AI bets — Reuters (via Euronext)

Prediction market Kalshi said trading tied to the midterms topped $1.4 billion by Nov. 3, with contracts implying a 93% chance Democrats would win the House and 73% for the Senate on election day itself. The Washington Post estimated nearly $1.9 billion traded across Kalshi and Polymarket combined.

Why it matters: The volume is still far below the $3.6 billion Polymarket alone saw around the 2024 presidential race, but it adds to scrutiny of political event contracts over insider-information and manipulation risks.

Source: Kalshi's US Midterm Trading Tops $1.4 Billion as Prediction Markets Price Democratic Sweep — FinanceFeeds

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Wishing you a great Wednesday — and welcome back tomorrow morning for the next edition of Kaupr Daily.

Best regards
Morten Myrstad
Founder & Editor