Bitcoin (BTC) is bracing for a period of significant volatility, driven by election uncertainty, the “Trump trade” narrative, and favorable historical trends for the fourth quarter, according to the latest report from Bitfinex Alpha.
As the US elections approach, Bitcoin has already exhibited erratic price movements, including a recent 6% dip after nearing the $70,000 mark. Bitfinex analysts warn that increased volatility is likely in the weeks ahead, particularly as the market anticipates how the election results may impact prices. A Republican win is generally seen as bullish for the markets, while a Democratic victory raises more uncertain implications.
Impact on Options Markets
The options markets are also reacting to the upcoming elections, with expectations of rising option premiums and daily volatility for both the US stock market and Bitcoin around November 6 and November 8. The report notes that volatility may spike as traders adjust their positions based on the election outcome, especially if former President Donald Trump returns to office, given his pro-crypto stance.
The implied volatility (IV) curve indicates heightened market expectations, with options expiring on November 8 showing IV levels exceeding 100 for strike prices above $100,000. Such high IV typically leads to increased option prices, as sellers seek higher premiums to compensate for the risk of sharp price fluctuations. This increase in cost reflects a cautious market sentiment bracing for significant price movements in the near future.
Recent options activity further supports this outlook, with notable interest in December call options at an $80,000 strike price, suggesting that traders are preparing for potential upward price momentum by the end of the year.
Signs of Strength in Q4
Despite recent price corrections, Bitcoin is showing potential for strength in the fourth quarter, which is historically bullish, especially in halving years. Currently, BTC is over 30% higher than its September lows and achieved a remarkable 7.29% gain last month, a notable improvement compared to typical challenges faced in September.
While pre-election anxieties may dampen Bitcoin’s performance as October closes, the historical average gain of 31.34% in the fourth quarter provides a hopeful outlook for bullish momentum. Notably, Bitcoin has never recorded a negative fourth quarter in a halving year.
The “Trump trade” narrative is also significant in Bitcoin’s current dynamics, with macroeconomic trends and increasing odds favoring Trump’s re-election adding to market uncertainty. Data from RealClearPolitics and Polymarket indicates Trump’s chances of victory at around 59% and 64.9%, respectively, contributing to the already volatile environment.