Bitcoin rockets above $80,000 for first time since Binance hack despite Democrats sweep, but a historical crash looms

Bitcoin surged more than 5% from its election-night low to reclaim $80,000 for the first time since Binance's record hack.

The cryptocurrency extended its recovery from approximately $75,600 on Wednesday, shaking off concerns that Democrats' takeover of Congress would undermine President Donald Trump's crypto-friendly agenda.

According to CoinGlass data, this rally liquidated $453.32 million in the past hour, with most of the losses coming from short traders. These losses reach $913.34 million over the past 24 hours.

The rally comes less than a week after Binance suffered a $6.34 billion security breach that sent shockwaves through the digital asset market, triggering withdrawals and intensifying an already difficult period for Bitcoin investors.

James Butterfill, head of research at CoinShares, told CryptoSlate that the Democratic sweep had largely been priced into Bitcoin before the election, creating room for a relief rally as political uncertainty dissipated.

His assessment reflects a growing distinction between the potential consequences of divided government for the wider crypto industry and Bitcoin itself.

Butterfill expects Democratic control to complicate efforts to advance the CLARITY Act, while potential investigations into Trump-linked cryptocurrency businesses could divert political attention from regulatory reform.

However, he argued that exchanges, token issuers and other companies requiring new regulatory permissions would be more vulnerable to those developments than Bitcoin.

He said that the cryptocurrency's direction remains more closely tied to real yields, dollar liquidity and exchange-traded product flows.

The broader financial markets have already begun reflecting that shift in attention.

According to institutional trading platform Talos, Bitcoin's DVOL, a gauge of expected volatility, declined 6%, while Wall Street's VIX fell 10% as reduced uncertainty encouraged systematic buying across risk assets.

The retreat in volatility coincided with a weaker dollar and declining Treasury yields, providing a more favorable backdrop for Bitcoin's recovery.

On-chain data suggests the rally is arriving as the selling pressure that dominated Bitcoin's recent decline begins to weaken.

CryptoQuant analyst Darkfost said the firm's seller exhaustion model has fallen to levels historically associated with bear-market lows.

The indicator compares the proportion of Bitcoin supply held at a profit with average monthly volatility to assess whether existing holders still have enough incentive to keep selling.

Its latest reading follows a correction of more than 10% from Bitcoin's previous high, during which short-term holders appear to have realized profits and reduced their exposure.

Previous episodes of similarly depressed selling activity have coincided with the formation of market bottoms, although the indicator offers no assurance that prices will immediately recover.

Darkfost identified a critical weakness in the current market: buyers have yet to demonstrate the same conviction as the sellers who recently exited. He said: