Most US financial markets will remain closed on Tuesday night as states tally votes in a high-stakes election between Donald Trump and Kamala Harris.
But the crypto market will be active, offering an exception for investors who may respond to election results in real-time.
Bitcoin, often seen as a barometer of confidence in alternative investments, is primed for potential gains if Trump has a favourable night.
Bitcoin price expectations by analysts in a post-election scenario
Analysts at Bernstein, led by Gautam Chhugani, expect a Trump win could boost Bitcoin prices above $80,000 within the next two months.
Conversely, should Harris prevail, they project Bitcoin might slip to $50,000.
Bitcoin was trading around $67,870 on Monday, a slight dip from last week’s high near $73,000. It topped $70,000 on Tuesday.
Harris, while supportive of a regulatory framework for crypto, has yet to make definitive policy commitments.
Standard Chartered analyst Geoff Kendrick suggested that if Harris wins, Bitcoin might close the year around $75,000, while a Trump victory could push it up to $125,000.
Analysts highlighted that forecasting Bitcoin prices is inherently difficult, as they are driven more by market sentiment and perceived future value than by conventional metrics like earnings.
Volatility is expected regardless of the result, should you trade?
Crypto traders appear braced for post-election volatility, according to a CF Benchmarks index that tracks futures activity to gauge expected 30-day volatility for Bitcoin.
On Monday, this index surged to its highest level since early August, signalling heightened expectations for price swings.
Analysts anticipate market movements regardless of the election outcome, with a particularly bullish outlook should Trump secure a victory.
The jury is out though whether trading the election results real time would be a wise step or not.
Crypto industry veteran Arthur Hayes said he has no intention of trading on the US presidential election, despite the potential volatility it might bring.
Speaking on the latest Unchained podcast episode, Hayes explained he’d rather avoid election-night risk in favour of more peaceful activity, like stretching in his yoga room.
Hayes said he finds election trading unappealing due to its uncertain returns. He compared chasing election trades to “trying to eke out a few percentage points,” which he feels doesn’t justify the risk.
He added that even if he correctly predicts the winner, short-term market reactions are unpredictable, potentially leading to losses even on a correct call.
Key metrics for crypto traders to watch on election night
Several indicators could reveal how crypto markets are responding as election results come in:
Tick trades data
Kaiko, a crypto data provider, advises monitoring tick trade data, which logs every buy and sell across crypto markets worldwide.
This data provided valuable insights during the first debate and is expected to be equally useful during the election, Kaiko said.
During the debate, CVD shifted negative, signalling a bearish response to Trump’s performance, as Harris was then viewed as potentially unfavourable for crypto.
Most traders and large institutions will be monitoring results, likely using proprietary tools for an edge.
Therefore, observing tick trades on major platforms provides insight into where “smart money” is moving, it said.
Funding rates
Funding rates will be crucial to monitor on election day.
Binance adjusts these rates every eight hours, starting at midnight UTC. On election day, this means rates will update mid-day (12 PM EST) and after voting closes on the East Coast (8 PM EST).
The next adjustment will occur at 4 AM EST on Wednesday, November 6. By then, there may be a clearer indication of the election outcome. Significant spot market movements could trigger liquidations, depending on the vote count at that time.
Traders, especially those with highly leveraged positions, will be sensitive to changes in the funding rate. Sudden spikes in rates could lead to squeezes and cascading liquidations, Kaiko said.
Implied Volatility
Implied Volatility (IV) is another critical derivatives metric to monitor, as it provides a forward-looking estimate of an asset’s expected volatility over a specific period—making it essential for gauging financial market risk, Kaiko said.
Tracking the IV term structure is especially insightful.
When short-term IV is higher than long-term IV, it creates an inverted term structure, often signalling a high probability of a near-term risk event, such as the US election.
In this instance, the recent surge to nearly $73,000 likely caught traders off guard, prompting them to adjust their exposure before Tuesday’s outcome.
As results roll in, these metrics will provide valuable insights for investors navigating the crypto market during an election season that’s expected to bring a new level of volatility.
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