Bitcoin’s price has been on the rise as volatility reaches new heights leading up to the U.S. election. Deribit’s bitcoin volatility index has surged to levels not seen since late July, indicating a significant risk premium around the impending elections. The implied volatility in EUR/USD and U.S. Treasury notes has also reached at least one-year highs, reflecting the uncertainty in the markets.
The options-based measure of expected price swings in bitcoin has hit a three-month high, with the seven-day implied volatility soaring to 74.4%. This spike in volatility is largely attributed to the upcoming Federal Reserve meeting and the anticipated election results on Friday. The cryptocurrency trading firm QCP Capital highlighted the heightened risk premium surrounding the elections, which has contributed to the surge in volatility.
The latest polls show a tight race between the pro-crypto Republican candidate, Donald Trump, and his opponent, Harris, in crucial swing states. The probability of Trump winning Pennsylvania has decreased, adding to the uncertainty surrounding the election outcome. These developments have had a direct impact on BTC’s price, which briefly reached record highs before retreating as Trump’s odds shifted.
In addition to the increased volatility in the cryptocurrency market, legacy markets have also experienced a spike in volatility. The Ice BofA Move index, which measures 30-day implied volatility in U.S. Treasury notes, reached its highest level since October 2023. This surge in Treasury market volatility has led to liquidity tightening and a reduction in risk asset exposure by traders, including cryptocurrencies.
Moreover, the one-week implied volatility in EUR/USD has risen to levels not seen since the mini-U.S. banking crisis of March 2023, further adding to the uncertainty in the currency markets. The heightened volatility across different asset classes reflects the nervousness and risk aversion among investors leading up to the election.
As the markets brace for a potentially turbulent period ahead of the U.S. election, it is essential for investors to closely monitor the evolving situation and adjust their strategies accordingly. The increased volatility in both cryptocurrency and legacy markets underscores the importance of staying informed and agile in navigating the rapidly changing landscape of global financial markets.
