Bitcoin Set for $6K-$8K Seesaw as U.S. Elections Enters Final Stretch: Analyst

As a seasoned crypto investor with a knack for spotting market trends and understanding their implications, I find myself bracing for a rollercoaster ride in the coming days. The impending U.S. presidential election has traditionally been a catalyst for significant price swings in the crypto market, as evidenced by the August drama that sent bitcoin plummeting to $50,000.

Traders who are hoping for increased fluctuations in Bitcoin‘s (BTC) value might get their wish, as experts in derivatives predict that the upcoming U.S. presidential election could lead to price changes similar to those seen in early August.

According to Greg Magadini, the director of derivatives at Amberdata, he anticipates a price range of approximately $6,000 to $8,000 following the election, which represents a +1.5-Sigma change.

Based on the volatility calculated from November 6th options trading on Deribit, which amounts to an annualized 112%, we can anticipate price swings of around $4,000 in either direction. A 1.5-sigma increase on this volatility implies a potential price range between approximately $6,000 and $8,000.

Previously, Bitcoin experienced a price trend reminiscent of its early August dip, as the reversal of leveraged positions in the “risk-on yen carry trade” caused widespread risk aversion and pushed Bitcoin’s value down to approximately $50,000.

In the latest updates, Magadini considers a 1.5-sigma volatility due to the close contest between the Republican contender, Donald Trump, who is known for being friendly towards cryptocurrencies, and his Democratic opponent Kamala Harris in the crucial seven battleground states.

The 50-50 chances suggest that the final result won’t significantly differ from what markets anticipate, regardless of who emerges victorious. This implies it’s uncommon to expect a significant shift or extraordinary occurrence (represented by a positive 3-sigma move), which is three standard deviations away from the average in a normal distribution. In simpler terms, it seems unlikely that we’ll witness a highly unusual event unfold.

In much the same way, anticipating a slight decrease of 1-sigma or a minimal change in prices before the event seems unlikely. This is because, given equal chances (50-50 odds), traders won’t be able to predict the election outcome ahead of time. The election is scheduled for Tuesday, and we can expect the results by Friday.

Keep in mind that volatility involves price movements that can go up or down. Given this, options traders are getting ready for a bullish surge in volatility, buying call options at $70,000, $85,000, and $90,000 strike prices on Deribit and the Chicago Mercantile Exchange. This would represent an increase of around $8,000 from Bitcoin’s current market rate of $68,800, which would set new record highs if it were to occur.

In other words, the cost of call options is higher than that of put options due to increased market volatility, reflecting a generally optimistic or bullish outlook, as suggested by Joshua Lim, co-founder of crypto derivatives trading firm and liquidity provider Arbelos Markets.

According to Lim, the prices for Bitcoin call options are increasing, despite a decrease in the current Bitcoin rate over the weekend, which might be attributed to unexpectedly poor poll results for Trump.

Lim mentioned that during significant events such as Thursday’s Federal Reserve interest rate announcement and the anticipated outcome of the U.S. elections on Friday, the volatility curve is projecting a price fluctuation between 7% and 8%.

DEX traders see greater volatility in ETH

Ether (ETH), which serves as the digital currency on Ethereum‘s blockchain and ranks as the second most valuable cryptocurrency globally, tends to be more unpredictable than Bitcoin. It seems this trend may persist following the upcoming U.S. elections.

As an analyst, I’ve been examining the on-chain options data available on the decentralized exchange Derive, and it appears that there is approximately a 68% probability for ETH to experience a price fluctuation between 9.35% and 10.19%. In similar terms, BTC could potentially show volatility within the range of 8.97% to 9.85%.

It appears that DEX traders are expecting an increase in market volatility with a positive bias, and their expectations are supported by the current data. As we stand on Sunday, there are more call options (1,179) compared to put options (885), indicating a strong leaning towards bullish sentiment among traders.

As the election approaches, these numbers become essential for traders aiming to steer through the increased unpredictability in the cryptocurrency markets. This stage is significant for on-chain options trading, showcasing the complex tactics that traders are using to protect themselves from or profit from anticipated market turbulence. Nick Forster, the founder of Derive, shared this insight with CoinDesk.