As the U.S. presidential election enters its final stages, analysts predict that Bitcoin (BTC) could experience price swings of $6,000 to $8,000. This estimate comes from Greg Magadini, director of derivatives at Amberdata, who believes the tight race between candidates could significantly impact the cryptocurrency market.
Anticipated Volatility in the Crypto Market
Market participants are bracing for increased volatility, especially with the upcoming election. Magadini expects a price reaction similar to the dramatic movements seen in early August. He stated, “I expect a +1.5-Sigma price range of $6,000 to $8,000 as a result of the post-election price reaction.”
This projection is based on an annualized forward volatility of 112%, derived from options trading data on Deribit as of November 6. It suggests a potential price fluctuation of $4,000 in either direction, which aligns with Magadini’s forecast of $6,000 to $8,000.
Bitcoin last experienced a notable price swing in early August when risk aversion in the markets caused it to drop to $50,000. Magadini attributes his prediction to the tight race between Republican candidate Donald Trump, who is seen as crypto-friendly, and Democratic candidate Kamala Harris in seven swing states.
Market Sentiment and Expectations
With the current odds showing a near 50-50 split, market participants do not expect any surprising outcomes, regardless of who wins. This indicates a low likelihood of an extreme price movement (3-sigma), while minimal price changes (sub-negative 1-sigma) are also unlikely. The election is scheduled for Tuesday, with results anticipated by Friday.
It’s important to note that volatility can move in either direction. Despite the uncertainty, options traders are preparing for bullish movements. They are purchasing call options with strike prices of $70,000, $85,000, and $90,000 on platforms like Deribit and the Chicago Mercantile Exchange. If Bitcoin rises by $8,000 from its current market rate of $68,800, it would set new record highs.
According to Joshua Lim, co-founder of crypto derivatives firm Arbelos Markets, call options are becoming more expensive than put options, reflecting bullish sentiment. “Bitcoin call options are repricing higher, even while spot prices decline this weekend due to unexpectedly weak polls for Trump,” Lim noted. He added that the volatility curve indicates a potential move of 7%-8% around key events this week, including Thursday’s Federal Reserve rate decision and the election results on Friday.
Ether Expected to See Greater Volatility
Ether (ETH), the second-largest cryptocurrency by market value, is anticipated to be more volatile than Bitcoin during the election period. Onchain options data from the decentralized exchange Derive indicates a 68% chance of ETH experiencing a price swing of 9.35% to 10.19%, compared to Bitcoin’s expected volatility of 8.97% to 9.85%. A 10% move in ETH would translate to a $247 change at its current market rate of $2,470, while a similar move in Bitcoin suggests a $6,800 fluctuation.
DEX traders are also expecting bullish volatility in Ethereum. As of Sunday, total call option open interest stood at 1,179 contracts, compared to 885 open put option contracts, indicating a bullish inclination among traders.
Nick Forster, founder of Derive, emphasized the significance of these figures as the election approaches. “These metrics are crucial for traders looking to navigate the increased uncertainty in the crypto markets. It’s a pivotal moment for onchain options trading, showcasing the advanced strategies traders are using to hedge against or capitalize on expected volatility,” he said.
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