Bitcoin Volatility Surges as US Presidential Election Nears

As the US presidential election draws near, traders are preparing for potential fluctuations in Bitcoin prices, driving up implied volatility in the options market. Analysts suggest that derivatives traders are speculating on price upswings or hedging against potential losses for options expiring after the November 5, election.

Bitcoin options show post-US election bullish bets and heightened volatility, analysts say https://t.co/uYtDbPo2zi

— The Block (@TheBlock__) October 10, 2024

Increased Bullish Bets

Presto Research analyst Rick Maeda notes a significant increase in bullish bets on longer-term bitcoin options set to expire at the end of the year, particularly on December 27. “Trump’s implied election odds from Polymarket hit their highest levels since early August this week,” Maeda stated. This surge in call options signals a strong bullish outlook ahead.

However, the futures market tells a more cautious story. Traders are wary of uncertainties surrounding the election and the Federal Open Market Committee (FOMC) meeting two days later. Open interest in BTC perpetual futures has remained stable since the second quarter, with funding rates in the low 7% range.

Vertex co-founder Darius Tabai highlights the growing cost of BTC options expiring after the election, with premiums on options around key dates like November 8 and December 27. “The spike in forward volatility demonstrates that the market is pricing a premium for the election and is expecting some event risk around the results”. Tabai explained.

Bitcoin’s Correlation with Trump’s Odd

Presto Research’s analysis reveals an 8% premium in BTC’s implied volatility ahead of the elections, loosely correlated with Trump’s odds in prediction markets. This “election premium” reflects the market’s expectation of heightened volatility during this period.

As election approaches, market participants are bracing for potential price swings. Will bitcoin’s value surge or decline? Only time will tell.

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