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In summary
- Bitcoin traders are bracing for increased volatility as the US election approaches on November 5, with estimates of price swings of up to 20%, according to data from derivatives platform DeFi Derive.
- The data shows a high concentration of bets around an $80,000 Bitcoin strike price and a strong presence of short-term call selling, as traders use options premiums to prepare for potential price movements.
- Bitcoin briefly surpassed $70,000 on Monday, reaching a level last seen in early June, rising more than 5% on the day to $71,200.
Bitcoin traders are bracing for increased volatility as the US election approaches on November 5, with estimates of price swings of up to 20%, according to data from derivatives platform DeFi Derive.
“The latest trading analysis reveals some compelling insights into market dynamics as we approach significant financial events,” Derive founder Nick Forster told Decrypt on Monday.
The data shows a high concentration of bets around an $80,000 Bitcoin strike price and a strong presence of short-term call selling, as traders use options premiums to prepare for potential price movements.
Bitcoin briefly surpassed $70,000 on Monday, reaching a level last seen in early June, according to CoinGecko. The asset rose more than 5% on the day to $71,200.
“The overwhelming dominance of sold calls suggests strategic premium collecting by traders, while the focus around the $80,000 strike highlights a potential turning point for Bitcoin,” Forster said.
In the past 24 hours, more than 47% of options sold were calls, or bets on a price increase, with traders looking to capitalize on “boosted” premiums due to election-related volatility, Forster explained.
Volatility patterns across different expiration dates show that traders are bracing for a bumpy ride in the coming weeks, but remain unsure which direction prices might take.
Americans will head to the polls to vote in the close US presidential election between Vice President Kamala Harris and former President Donald Trump. So far, Trump has promised a more precise policy targeting cryptocurrencies.
Short-term volatility, reflecting expected price movements, now exceeds long-term volatility, with a notable peak expected around election week, Forster added.
That indicates that traders are betting that the US election could trigger immediate effects on the price of Bitcoin, potentially causing wild swings as events unfold.
The trend is highlighted by an increase in the volatility of options expiring in seven days, signaling greater sensitivity to upcoming economic and political news.
“There is a one in three chance that BTC could see a greater than 10% move on Election Day, with a more volatile scenario of a 20% move having a 5% chance,” Forster said. “These figures indicate the potential for substantial price action linked to the election results.”
Forster also mentioned that traders are paying more for options, signaling protective moves, or “hedging,” as the election approaches. This additional cost, known as the volatility risk premium, shows that traders anticipate larger price changes and are willing to pay to manage their risk.
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