State of the Market: Treading on Thin Ice: The Post Election Selloff Through Liquidity & Flows

Weekly pulse

Treading on Thin Ice: The Post Election Selloff Through Liquidity & Flows

Markets whipsawed over the past week as investors digested the midterms and reassessed the outlook for the AI trade. A brief post-election rally gave way to a sharp selloff across equities and digital assets on November 5, with Nvidia and other AI-linked stocks leading the decline. The volatility shock was larger in equities relative to their recent baseline, with Nasdaq-100 realized volatility roughly 2.4x its pre-election three-month median, compared with 1.3x for BTC. After initially outpacing equities in the post-election rally, BTC joined the broader risk-off move and has since lagged the rebound.

Source: Talos CM Market Data, (Reference Rates & Market Candles)

BTC’s 30-day correlation with the Nasdaq-100 remains elevated at 0.7, consistent with sensitivity to shared shifts in risk appetite. Its correlation with gold has faded to 0.37 from its high in September, so BTC is behaving like a risk asset rather than digital gold. Following Monday’s equity rebound, hotter than expected October CPI and a more hawkish December Fed outlook renewed pressure on risk assets, sending BTC back toward an 11-week low near $73,500.

Beneath the turbulent price action, liquidity has thinned. BTC 1% order-book depth fell roughly 33% below its recent baseline at the low and remains 10–15% below, while liquidations compounded recent declines. Elevated leverage, ETF outflows and contracting stablecoin supply leave the market vulnerable to further sharp moves.

With leadership uncertainty at Nvidia posing potential spillover risk for the AI trade, markets are now gearing up for Anthropic’s anticipated IPO next week, a direct test of investor appetite around AI. ANT pre-IPO perpetuals have amassed over $400M in open interest and imply an average valuation near $1.4T, with TradeXYZ pricing shares roughly 24% above proposed IPO range.

Market movements

The total crypto market cap stands at $2.54T, down 9% over the week, with BTC dominance at 58.2%. Bitcoin fell 8.3% against rising equity indices and gold fell (-2.6%). Altcoins fell harder, with ETH down (−15.5%), SOL (−13.2%), HYPE (−14.6%), taking ETH/BTC down 7.8% to 0.0278.

Bitcoin sits just above its 200-day moving average (+0.9%), as does the S&P 500, while ETH, SOL and the Nasdaq-100 trade 3.7–5.3% below theirs. Weakness has broadened beyond BTC, with only 34% of the tracked top-50 universe above its 200-day average, down from 40 (83%) a month ago.

Source: Talos State of the Market Dashboard, Talos CM Market Data

Liquidity & flows

• Spot Bitcoin ETFs recorded $1.66B in net outflows over the past 30 days, including $684M in the past week, indicating softer demand through the fund channel.
• Stablecoin supply contracted by $2.15B over the past week, led by USDC (-$1.1B) and USDS (-$1.1B), with the decline concentrated on Ethereum, suggesting a retreat in crypto-native liquidity and less fuel for a sustained recovery.
• Order Flow (CVD) Aggregate BTC spot CVD across four venues recovered from roughly -$155M to +$130M, following a pre-selloff peak near +$380M. Spot buying on Binance, OKX and Bybit offset persistent Coinbase selling. Binance perpetual CVD remained negative at roughly -$500M, consistent with the selloff being led by leveraged selling.

Source: Talos CM Market Data, Market Trades (Cumulative Volume Delta (CVD) is measured from November 2 and represents the cumulative sum of aggressive buying minus aggressive selling in spot and perpetuals)

Positioning

• BTC Open Interest & Funding: BTC perpetuals open interest is close to its highs near 463K BTC, rising even as price fell this week. OI relative to market capitalization stands at 2.3%, its 93rd percentile over the past year. Seven-day average funding was +7.8% annualized versus a one-year median of 4.3%, indicating that derivatives exposure remains elevated despite the drawdown.
• Altcoin Positioning: Eight out of the top 10 tokens, including BTC, sit at or above their one-year 80th percentile for OI-to-market-cap, with XMR at a one-year high. ETH is the exception, below its median.

Source: Talos CM Market Data

Treading on thin ice: Liquidity conditions amplifying volatility

Given the amplified post-election volatility, we examined liquidity beneath the price action to assess execution risk and the market’s capacity to absorb larger trades. Orderbook depth within 1% of the mid-price shows that liquidity thinned through the selloff. Across selected spot BTC markets on Binance, Kraken and Coinbase, 1% depth averaged roughly $97M since election day, about 10% below its normal level of $108M. It fell by about a fifth within hours of the Nov 5 selloff, recovered by the weekend, then dropped to its thinnest on Monday Nov 9 at $72M (−33%).

With less depth available to absorb selling, liquidation-driven flows can have a greater price impact. Since late July, in hours when depth fell below ~$84M (the thinnest 10% of hours), BTC moves averaged ~0.30%, about 1.6x the 0.18% typical when depth sat above $105M. This does not establish that low depth caused the moves, but it highlights the greater price sensitivity associated with thin liquidity.

Source: Talos CM Market Data

Bid-ask spreads, the gap between the highest bid and the lowest ask on each venue also widened over the same windows. The median spread across venues peaked at roughly 2.2x its typical level after the November 5 selloff and again after Tuesday’s CPI release, and stood near 1.6x as of Wednesday. In absolute terms, however, spreads remained below one basis point, with the widest venue peaking at approximately 0.8 bps.

Source: Talos CM Market Data

Liquidity remains thin while leverage stays elevated, leaving the market vulnerable to sharp moves in either direction. A rebuild in order-book depth and a turn in capital flows would provide a firmer foundation for recovery.

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^{Disclaimer: Talos Global, Inc. and its affiliates ("Talos") is not an investment advisor or broker/dealer. This information does not constitute an offer to buy or sell, or a promotion or recommendation of, any digital asset, security, derivative, commodity, financial instrument or product or trading strategy. This information is not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. This information is subject to change without notice. It is provided only for general informational, illustrative, and/or marketing purposes and is not intended for retail clients. The information provided was obtained from sources believed to be reliable at the time of preparation, however Talos makes no representation as to its accuracy, suitability, non-infringement of third-party rights, or otherwise. Talos disclaims all liability, expenses, or costs arising from or connected with the information provided. All content is provided for informational and illustrative purposes only. It does not represent firm offers, executable prices, or commitments of any kind, and should not be relied upon as indicative of current or future market prices or the terms on which any transaction may be executed.}

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