Major altcoins, including Ethereum (ETH), experienced a sharp decline, with some falling as much as 8%. This downturn appears to be driven by growing concerns over increased regulation of the artificial intelligence (AI) industry following the U.S. midterm elections. These worries have spread beyond tech stocks, dampening investor sentiment in the cryptocurrency market.

As of 9:32 a.m. (KST) on Friday, CoinMarketCap data showed Ethereum's global price had dropped 7.74% to 2,240 USD. Bitcoin (BTC) fell by 4.90% during the same period, while other major altcoins saw even steeper declines.

XRP traded at 1.25 USD, down 6.95% from the previous day. Solana (SOL) fell by 6.14%, while Hyperliquid (HYPE) and Dogecoin (DOGE) plummeted 8.38% and 6.61%, respectively.

Market analysts point to the midterm election results as a key factor in this decline. With Democrats maintaining control of Congress, there are concerns about potential changes to data center licensing, construction regulations, and tax incentives. These potential shifts have cast a shadow over investor confidence.

The ripple effect from the tech sector's downturn, fueled by AI investment concerns, has spread to other risk assets, including Bitcoin and major altcoins.

The cryptocurrency market's mood has soured further. CoinMarketCap's Fear and Greed Index dropped 10 points to 32, moving from neutral into fear territory. This index uses a 0-100 scale, where 0 represents extreme fear and 100 indicates extreme greed.

Santiment, an on-chain analysis firm, reports that the cryptocurrency market is feeling the impact of regulatory concerns surrounding the AI industry in the wake of the U.S. midterm elections.

According to Santiment, Bitcoin's price movements are closely correlated with tech stocks and are highly sensitive to risk appetite. Investors are wary that Democratic control of both chambers of Congress could lead to tighter regulations on data centers and changes in tax policies, potentially stunting AI industry growth.

The firm added that if data center regulations don't materialize into concrete policies, selling pressure might ease. However, if these regulations do come into effect, both AI infrastructure-related stocks and the cryptocurrency market could face continued downward pressure.

Some experts caution against reading too much into this short-term sell-off.

Jasper De Maere, an over-the-counter (OTC) trader at cryptocurrency market maker Wintermute, noted that cryptocurrencies have shown resilience amid stock market turbulence. He emphasized that the growing mainstream adoption of cryptocurrencies supports a bullish long-term outlook.

De Maere concluded by stating that while short-term developments warrant close monitoring, the medium to long-term prospects remain positive. Given the high correlation among various assets, he advised investors to stay alert for undervalued opportunities that may emerge as the market evolves.

Major altcoins, including Ethereum (ETH), experienced a sharp decline, with some falling a …

AI Regulation Fears Trigger 8% Drop in Ethereum and Altcoins: Is the Market in Trouble?