Bitcoin tests key support as election uncertainty and tech sell-off weigh

Bitcoin has fallen to a six-week low amid the ongoing fallout from the Binance hack, the global tech rout and cautious trading ahead of the U.S. midterm elections.

Bitcoin has fallen 1.5%, trading at $76.3K and reaching its lowest level since early September. The sell-off comes after a 6% loss in October, marking its worst October performance in 12 years.

Midterm elections

Crypto markets are cautious ahead of the U.S. midterm elections, which will see Americans going to the polls later today.

The results of these elections could set the regulatory agenda for the remainder of President Trump's term. With voters frustrated amid record petrol prices, corruption and the prolonged war with Iran, Trump and his Republican Party are expected to struggle.

The Democrats are widely expected to take the House of Representatives, although the fight for the Senate could be tighter.

A blue sweep, where the Democrats take control of both the House of Representatives and the Senate, could dampen the prospect of more pro-crypto legislation over the coming two years.

This comes as Trump and the Republicans have attempted to push pro-crypto legislation over the past two years, although the Clarity Act failed to pass Congress.

Therefore, a Republican loss or even a gridlocked Congress could limit the prospect of further pro-crypto regulation, which could keep BTC under pressure.

The midterms come at a time when the market is also continuing to weigh the $6.3 billion hack on Binance. Brazil's largest cryptocurrency exchange, Mercado Bitcoin, has also said that it suffered a security incident involving $46.3 million in assets, although no customers were affected.

Tech selloff, ETF outflows and macro headwinds

The sell-off in tech stocks is bringing another headwind to Bitcoin. The tech-heavy Nasdaq has lost 5% over the past three sessions, and futures are pointing to a lower start today amid worries over the sustainability of the AI trade. This matters because Bitcoin has a strong positive correlation with tech stocks.

With Bitcoin facing headwinds from several directions, ETF outflows have picked up. BTC ETFs recorded $398.6 million in net outflows on Monday, following $643.3 million in net outflows on Friday.

Looking ahead, the results from the midterm elections will start to come through in the evening local time, but results in some more contested areas could take days. In addition to the election results, macroeconomic data will also be in focus, with nonfarm payrolls due on Friday. Strong jobs data could cement expectations of a December rate hike, adding another headwind to BTC's outlook.

Bitcoin technical analysis

After running into resistance at $87.3K, BTC/USD has fallen lower, breaking below the 50 EMA and testing support at the 200 EMA and the 38.2% Fibonacci retracement of the move from the $57K low to the $87.3K high. Momentum is fading, with the RSI below 50.

A break below these key supports at $76K would open the door to a deeper decline towards $72.6K, the 50% Fibonacci retracement, and then $70,000.

Should support hold, buyers could look towards $80,000, where the 50 EMA, the 23.6% Fibonacci retracement and the psychological level converge. A move back above this area would put the price on a firmer footing. 

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