Bitcoin traders are preparing for potential price fluctuations as the U.S. election approaches, according to data from the CME bitcoin options market. Put options, which provide protection against price drops and expire within a week, are currently more expensive compared to calls, indicating a hedging strategy by traders.
The 25-delta risk reversal for contracts expiring on Friday shows a bias for puts, with a -1.3% metric on Monday. This suggests that traders are more inclined to purchase put options to guard against potential downside risks. In contrast, pricing for longer-duration options is skewed towards calls, signaling a positive outlook and aligning with analysts’ expectations of a year-end rally towards $80,000 and beyond.
The upcoming U.S. election has added uncertainty to the market, with polls showing a close race between Democrat Kamala Harris and Republican candidate Donald Trump, who is seen as favorable towards cryptocurrencies. This uncertainty could lead to significant price swings in Bitcoin, with some observers predicting a $6,000-$8,000 movement based on the election outcome.
On the Deribit exchange, options trading also reflects a bullish sentiment, with short-term and long-term risk reversals showing a neutral bias for the current week. However, sentiment turns decisively bullish from the Nov. 15 expiry onwards, indicating optimism among traders for the future price movements of Bitcoin.
Overall, the market is preparing for potential volatility in Bitcoin’s price as the U.S. election unfolds. Traders are using options to protect against downside risks while maintaining a positive outlook for the cryptocurrency’s future performance. The outcome of the election is expected to have a significant impact on Bitcoin’s price trajectory, with analysts closely monitoring the developments for potential trading opportunities.