With the upcoming event of the presidential election in the US, Bitcoin price options traders are preparing for strong market volatility. Data from the Derive derivatives platform shows a large amount of options contracts being bet on a price of $80,000 for Bitcoin and a volatility range of up to 20% before the election on November 5.
Derive founder Nick Forster stated, 'The latest trading analysis provides eye-opening insights into the market to predict significant trading events.' This election noise has affected both short-term and long-term volatility that traders rely on their strategies to bet on Bitcoin price volatility.
The frenzy in elections meets the demand for Bitcoin price trading tools
Bitcoin's price surged above $70,000 last weekend, reaching a high of $71,200 on Monday, CoinGecko revealed, a level not seen since late May. This, in turn, has helped boost bullish sentiment among investors, especially as new Bitcoin ETFs attracted nearly $1 billion in new assets last week, according to European asset management company CoinShares.
Such optimism seems tied to the very tense election between current President Donald Trump, who is out of power, and current Vice President Kamala Harris. Some of the main reasons for the leading cryptocurrencies gaining market value are related to Trump and his policies, as well as promises to improve existing policies and laws regarding cryptocurrencies.
In summary, Forster shares that 'The fact that there are so many buy orders being sold suggests that traders may be using a price accumulation strategy' and, around the strike price of $80,000, there could be a turning point for Bitcoin.
Economic progress and these new ETFs have fueled optimism among Bitcoin investors as they provide additional opportunities to enter the cryptocurrency market. Increased demand may be the reason Bitcoin continues to rise as people prepare for the election results.
High stakes in short-term trading
There is very strong, almost horizontal action in the options market. The options traded in the past 24 hours are more than 47% call options. According to Forster, traders are looking to profit from the anticipated 'fixed premium' caused by the elections. However, it’s not just positive sentiment affecting the market – overall short-term volatility has become higher than long-term volatility due to the uncertainty of the election.
Forster mentioned that reflecting these short-term trading strategies means 'higher expectations regarding future political and economic events' and many investors in options contracts are willing to pay a premium for the same. This protective strategy, often referred to as hedging, shows that even enthusiastic traders have insured themselves in case Bitcoin's price may fluctuate depending on the upcoming election.
Forster points out that betting, reaching a change of more than 10%, has a one in three chance of occurring on election day, while there is only a 5% chance of Bitcoin's price changing by 20 percent. Such predictions merely indicate how volatile the market can be when anticipating sudden and strong price changes but not its direction.
Volatility on election day as investors hedge risks
Bitcoin's price has proven to be significantly sensitive to major events in the past and that hasn't changed in the current election year. In preparing for an uncertain election, some traders have implemented protective measures against significant price changes. Forster points out that the price of options has risen due to the risk premium of volatility as people try to avoid adding risk to their portfolios.
Higher costs for protective options indicate that traders understand the potential risk factors and are willing to pay a premium for their investments. By delineating betting levels and price volatility, Derive and other platforms suggest that the election could be a turning point for Bitcoin.
The shift to short-term contracts, especially around the strike price of $80,000, demonstrates high risk as investors try to balance bullish and bearish sentiment. Analysts based in the UK also expect Bitcoin to be more volatile as it approaches the election date and afterwards, as this cryptocurrency and traditional financial markets may react differently to the results.
Conclusion: High expectations and high risks
With the upcoming US election, Bitcoin traders remain divided but still as active as usual, with $80,000 being both a potential and a threat. New statistics illustrate an intriguing mix of buy orders and risk-hedging, indicating the volatility of the cryptocurrency.
Therefore, in the long run, regardless of who wins the election and the impact of that result on short-term prices, the future of Bitcoin remains uncertain. As seen in previous cycles, political events related to economic activity will continue to dictate cryptocurrency prices for months to come. Since the market is sensitive to any form of election outcome, Bitcoin could either reach new highs or experience a sharp decline depending on events in the coming days.