- Crypto traders may underestimate post-election risks, delaying volatility resolution.
- Congressional outcomes could influence Federal Reserve policies and asset stability.
The much-anticipated U.S. presidential election has arrived, sparking a wave of tension across stocks, bonds, and the crypto market. Investors are preparing for potential turbulence as forecasts point to a highly contested race. Bitcoin remains a focal point, continuing to be viewed as a “Trump trade”, reports QCP.
The “Trump trade”—comprising long positions in the U.S. dollar, crypto, and bets on rising Treasury yields—has gained momentum, boosted by Trump’s advantage in betting markets. Yet, a Harris victory could swiftly reverse these trends, causing pronounced overnight market reactions.
Moreover, the crypto community is bracing for a possible 3.5% fluctuation in Bitcoin prices on election night. However, there is growing concern that traders may be overlooking -post-election risks. The current absence of a volatility premium beyond the November 8 options expiry implies that the market expects a smooth outcome, potentially underestimating delays or contested results.
Traders Vs Historical Patterns
Historical patterns highlight how unpredictable election outcomes can be. In 2016, Donald Trump’s unexpected win triggered an initial slump in U.S. futures, followed by a rapid recovery, with trading volume soaring in the days that followed. Similarly, in 2020, Joe Biden’s victory was not confirmed for four days, leading to trading activity that reached a half-year high.
Beyond the presidential race, the results of congressional contests are equally critical. A Republican takeover could signal higher future fiscal deficits, which may force the Federal Reserve to adopt a more hawkish approach—an outcome that would likely put pressure on risk assets. On the other hand, a divided Congress could lead to a more stable environment, calming market volatility.
In the crypto options space, a balanced distribution between calls and puts is evident, with notable activity on both sides. As polling closes and results start coming in, traders expect Bitcoin to experience unpredictable price swings, with the market reacting in real-time to the unfolding political landscape.
