Bitcoin traders are bracing for increased volatility as the Nov. 5 U.S. presidential election approaches, with price fluctuations expected to be as high as 20%, according to data from DeFi derivatives platform Derive.
“Our latest trading analysis reveals some compelling insights into market dynamics as we approach key financial events,” Derive founder Nick Forster said on Monday. told Decrypt.
The data shows a concentration of bets around the $80,000 Bitcoin strike price and strong short-term call selling as traders use option premiums to protect against possible price movements. It shows that there is.
According to CoinGecko, Bitcoin briefly topped $70,000 on Monday, reaching levels last seen in early June. Assets rose more than 5% on the day to $71,200.
“While the preponderance of call sales suggests strategic premium recovery by traders, the focus surrounding the $80,000 strike highlights a potential key point for Bitcoin. “There are,” Forster said.
More than 47% of options sold in the past 24 hours were calls, or bets that prices would rise, with traders looking to take advantage of the “juice premium” from election-related volatility, Forster said.
The pattern of volatility across various expirations suggests that traders are bracing for a bumpy week ahead, but there is still no certainty as to what direction the price will take.
Americans will head to the polls to cast their votes in the tightly contested US presidential election between Vice President Kamala Harris and former President Donald Trump. Trump has so far promised more precise policies targeting cryptocurrencies.
Short-term volatility, which reflects expected price movements, currently exceeds long-term volatility, and a significant spike is expected around election week, Forster added.
This indicates that traders are betting that the US election will have an immediate impact on Bitcoin prices, potentially causing sharp swings depending on how events unfold.
This trend is highlighted by increased volatility for options expiring within seven days, indicating increased sensitivity to upcoming economic and political news.
“There is a 1 in 3 chance that Bitcoin will move more than 10% on election day, and a 5% chance of a more volatile scenario of a 20% move,” Forster said. “These numbers indicate the potential for significant price movement” tied to the election results. ”
Forster also said that as elections approach, traders are paying more for options that suggest a protective move, or “hedging.” This additional cost, known as the volatility risk premium, indicates that traders anticipate larger price movements and are willing to pay for risk management.
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