As the U.S. presidential election heats up, crypto traders are preparing for a potentially volatile period in the Bitcoin (BTC) market. Analysts foresee significant price swings, reminiscent of the dramatic fluctuations seen earlier this year. According to Greg Magadini, director of derivatives at Amberdata, the market could experience a price range of $6,000 to $8,000 based on a projected 1.5-sigma volatility post-election. This level of volatility is anticipated from the Nov. 6 options trading data on Deribit, suggesting substantial market movements equivalent to a $4,000 shift in either direction.
Such swings were last observed in August when geopolitical factors triggered risk aversion, influencing Bitcoin's value significantly. Magadini explains that the ongoing close contest between Republican candidate Donald Trump, regarded as favorable to cryptocurrency, and his Democratic rival Kamala Harris suggests that market surprises are unlikely regardless of the election outcome. This reduces the likelihood of an extreme 3-sigma move, a three-standard-deviation event in market terms. Consequently, traders should not expect minimal price actions either, given the balanced odds.
The upcoming election results are expected by Friday after Tuesday's voting, and certainly, the market can expect movements in both directions due to inherent volatility. Options traders are strategically preparing for potential bullish volatility, as evident from call purchases at high strike prices on platforms like Deribit and the Chicago Mercantile Exchange, positioning them for possible record-breaking BTC values should the market swing upwards.
Joshua Lim of Arbelos Markets observes that call options are becoming more expensive relative to puts, despite recent drops in spot prices, driven by weak polling data for Trump. Additionally, market observers like Lim note that the volatility curve anticipates a 7-8% shift surrounding critical events such as the U.S. Federal Reserve's rate decision on Thursday and the election results on Friday.
Beyond Bitcoin, Ether (ETH) is also expected to experience heightened volatility, with decentralized exchange data predicting a potential 9.35% to 10.19% swing. This is consistent with ETH’s historical trends of being more volatile than BTC. As of latest reports, traders are gearing up for bullish movements in ETH as well, with call options significantly outnumbering put options.
The impending election is a crucial time for traders utilizing on-chain options strategies to mitigate risk or capitalize on volatility. Nick Forster of Derive emphasizes the importance of these strategies for traders navigating the complexities of the crypto market during this election period.
