As the U.S. Presidential election, set for November 5, draws near, Bitcoin traders are preparing for a surge in volatility, with price swings expected to reach as high as 20%. This data has been provided by DeFi derivatives platform Derive.
“The latest trading analysis reveals some compelling insights into market dynamics as we approach significant financial events,” Nick Forster, the founder of Derive, shared with Decrypt on Monday. The data reveals a high concentration of bets around a Bitcoin strike price of $80,000, and a strong prevalence of short-term call sales, indicating that traders are leveraging option premiums in anticipation of potential price fluctuations.
Bitcoin briefly surpassed the $70,000 mark on Monday, a level that had not been seen since early June, before it fell again, according to CoinGecko. “The overwhelming dominance of calls being sold suggests a strategic premium collection by traders, while the focus around the $80,000 strike highlights a potential pivotal point for Bitcoin,” Forster explained.
Over the past 24 hours, more than 47% of options sold were calls, or bets on a price increase. Traders are looking to capitalize on the “juiced premiums” that are expected as a result of the election-related volatility, Forster explained.
Volatility patterns across different expiration dates are showing that traders are gearing up for a turbulent ride in the week ahead, but the direction of the price shifts remains uncertain.
Americans will soon be casting their votes in the highly competitive U.S. presidential election fight between Vice President Kamala Harris and former President Donald Trump. So far, Trump has promised more precise policies targeting cryptocurrencies.
Short-term volatility, an indicator of expected price changes, is now outpacing long-term volatility, with a significant surge expected around election week. “This suggests that traders are betting the U.S. election could trigger immediate effects on Bitcoin’s price, potentially causing sharp swings as events unfold,” Forster said.
This trend is emphasized by an increase in volatility for options set to expire within a week, indicating a heightened sensitivity to upcoming economic and political news.
Forster shared that there is a one in three chance that Bitcoin could experience a price swing greater than 10% on election day, and a more volatile scenario of a 20% movement has a 5% probability.
In addition, Forster pointed out that traders are paying more for options, a sign of protective moves, or “hedging,” as the election approaches. This increased cost, known as the volatility risk premium, shows that traders anticipate larger price shifts and are prepared to pay to manage their risk.
