Analysts have observed an increase in bullish bets on bitcoin through long call options expiring after the US presidential elections.
Expected Increase in Volatility
As the US presidential elections approach, traders are preparing for increased bitcoin price volatility. The options market reflects rising expectations of price fluctuations, particularly in connection with the November 5th election. Implied volatility – a measure of expected future price changes – has risen as traders speculate on potential price rises or hedge against possible downside risks.
Rise in Bullish Bets on Long-Term Options
According to Rick Maeda from Presto Research, much of the activity is focused on long-term call options, especially those expiring at the end of the quarter. "We see a clear rise in bullish bets on options expiring at the end of the year," Maeda noted. "Trump's election odds have reached their highest level since early August."
Maeda added that 64.53% of options target the expiration date of December 27, 2024, and 79.79% target March 28, 2024, signaling an optimistic market outlook.
Caution in the Futures Market
On the other hand, the futures market shows more caution. Maeda pointed out that futures traders remain restrained due to uncertainties surrounding the elections and the FOMC meeting two days after the elections. Open interest in bitcoin perpetual futures remains stable, as do the weighted funding rates, which are currently in a low range of 7%.
Election Premium Increasing Option Prices
Darius Tabai, co-founder of Vertex, highlighted the rising cost of bitcoin options expiring after the elections. He noted a premium for options expiring around key dates like November 8 and December 27, as the market expects significant price movements related to election outcomes.
Tabai stated that this rise in volatility reflects that traders are anticipating a major impact on cryptocurrencies. "The rise in implied volatility shows that traders are either speculating or hedging against risks."
Estimated Election Premium
Presto Research's analysis also points to an election premium in bitcoin's implied volatility. They estimate an 8% premium in volatility ahead of the November 2024 elections, reflecting market expectations of heightened volatility during this period. Additionally, this premium shows some correlation with Trump's odds on prediction markets.
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