Crypto Market Braces for Election Volatility as Bitcoin Awaits Big Moves

• Bitcoin and crypto investors brace for volatility as the U.S. election unfolds.
• Traders are eyeing a “Trump trade” trend, with increased long positions in the dollar, crypto, and Treasury yields.
• Historical data suggests that post-election uncertainty may linger, with past elections showing prolonged volatility.

The crypto market, along with stocks and treasuries, is bracing for volatility on what promises to be one of the most tightly contested U.S. presidential elections in recent history. Dubbed the “Trump trade,” a trend of increased long positions in the dollar, cryptocurrency, and Treasury yields has gained momentum in anticipation of a Trump victory, with his lead reflected in prediction markets. 

However, the tides could shift dramatically if Kamala Harris clinches a win, potentially unleashing substantial market swings overnight.

Bitcoin Projected Movement

In the lead-up to Election Day, traders are eyeing a projected 10% price movement in Bitcoin (BTC), with the most volatility expected as polls close. Yet, according to QCP Capital’s election commentary, the market may be underestimating post-election uncertainty. 

The lack of a volatility premium beyond November 8 signals an expectation of a quick result. However, past election cycles, such as the extended counting in 2020, indicate the potential for delays or contested results that could sustain market turbulence in the days following Election Day.

Historical data supports this view. When Trump won unexpectedly in 2016, U.S. futures initially dropped sharply before recovering, with the two days following Election Day marking the busiest trading period in six months.

Image by Santiment

Similarly, in 2020, election results were not confirmed for four days, leading to a trading surge to six-month highs. A similar pattern could emerge in the crypto market this time around.

In its analysis, Santiment, a market intelligence platform, pointed out that the data from the last two U.S. elections does not provide a large enough sample to draw firm conclusions. 

While markets went bullish after the 2016 and 2020 elections, it is unclear whether post-election trends in crypto are truly significant, given that crypto has generally been rising over time. It concluded that the impact of U.S. elections on cryptocurrency may be overstated.

In recent days, the crypto options market has reflected balanced sentiment, with increased interest in both calls and puts as traders prepare for potential price fluctuations. Despite this, BTC remains tethered to the “Trump trade” narrative. Spot prices slipped following significant outflows from spot ETFs on Monday, coinciding with a Harris lead in an Iowa poll.

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