U.S. Elections Drive High BTC Volatility Expectations

• BTC approaches an all-time high amid election week anticipation, while ETH remains subdued, failing to break $2.7k levels.
• BTC futures and options open interest surged, with implied volatility indicating a significant risk premium ahead of the U.S. elections.

Recent market updates from QCP Capital expose interesting swings and reactions linked to the U.S. economy and approaching election week. With a 2.7% year-over-year increase instead of the expected 2.6%, Thursday’s Core Personal Consumption Expenditures (PCE) data exceeded expectations.

Friday, however, presented a different surprise with Non-Farm Payrolls (NFP) statistics showing just 12,000 instead of the projected 110,000, much below forecast. As market players reviewed their positions, this mixed economic picture caused the U.S. Dollar Index (DXY) to recover and reach the 104 level.

Market Reactions Highlight Cautious Sentiment Ahead of Election Week 

U.S. unemployment was constant at 4.1%, a fact that highlights ongoing labor market resiliency even with the dismal NFP data. This change has increased the chance of a 25 basis point rate reduction in November, which today stands at 96.4%.

Equity indexes have also reflected the market’s response; Friday closed on a bullish note after strong Amazon (AMZN) earnings. U.S. Treasury yields, which first fell in reaction to NFP data, later peaked four months from now.

This change shows market caution ahead of Election Week since traders are still reluctant to commit significant bond purchases.

Adding to the market dynamics, Brent and West Texas Intermediate (WTI) crude oil prices showed no increase in response to rumors implying Iran was getting ready for a retaliatory strike on Israel. This geopolitical uncertainty brought a layer of risk that affected the general attitude and asset movement during the week.

BTC Outshines ETH as Institutional Inflows Boost Crypto Market 

Bitcoin (BTC) added more mystery since it reached a trading figure of $73,600 on Tuesday night, approaching its all-time high (ATH). Anticipation over the election week drove this increase and attracted a lot of attention from the crypto community.

Though Bitcoin’s weekly performance was outstanding, Ethereum (ETH) trailed, trying to reach the 2,700 mark and stayed somewhat quiet in relation. This difference between BTC and ETH performance highlighted the changing strategic inflows and investor attention.

Especially, the crypto market saw significant ETF inflows during this period, with a net inflow of $2.1 billion for BTC all through the week.

Alone, BlackRock’s iShares Bitcoin Trust (IBIT) brought in an amazing $872 million net inflow in one day—the highest inflow since its launch in January. These results strengthened confidence even with sporadic market declines by confirming the strong desire for institutional exposure to Bitcoin.

By Friday, though, Bitcoin had dropped below the $69,000 mark. Open interest (OI) in BTC futures and options shows that market interest in spite of this drop stayed high. Reflecting increases of 24.20% and 36.76%, respectively, since the start of October, the total OI for BTC futures soared to $40.65 billion, while the OI for BTC options rose to $25.3 billion.

With BTC’s seven-day implied volatility trading at 74.4%, well above the realized seven-day volatility of 41.4%, the options market also highlighted elevated expectations. As the market gets ready for possible movements motivated by elections, this disparity points to a clear risk premium.

Election Week Volatility Expected Amid Shifting Political Odds 

Looking forward to Election Week, market players expect great volatility. As expected POTUS, former President Donald Trump has led in favorability, but his odds on Polymarket have lately dropped from 66% to 57%. Vice President Kamala Harris trails at 43%.

This change in betting odds points to increasing uncertainty about approaching election outcomes. Market analysts—including QCP Capital—predict that the election will set off a “sell-the-news” situation similar to the behavior of the market observed during the Nashville Bitcoin conference.

High-profile attendees included Trump, who promised to turn the United States into the “crypto capital of the planet,” drew great interest for this conference in July 2024. Though market excitement first surged, the post-event reality was a clear “sell the news” reaction that caused asset values to fall.

Based on their Volatility Momentum Indicator (VMI), past reports by QCP Capital have underlined that significant events usually cause noteworthy volatility; BTC and ETH have seen more price swings in this regard.

Beside that, CNF previously revealed that regardless of the winner, Brad Garlinghouse, CEO of Ripple, expects a notable change in the crypto scene after the approaching U.S. elections. This attitude reflects the anticipation of change and adaptation of the larger market in reaction to political and legal developments.