Bitcoin expected to face high volatility as ‘Trump trade’ and Q4 seasonality converge – Bitfinex

[29/10/2024]
Bitcoin acting as a "Trump trade" and signs of a potential strong fourth quarter suggest high volatility is on the horizon.

Bitcoin (BTC) is set to face turbulent weeks ahead, with election-related uncertainties, the "Trump trade" narrative, and historically favorable conditions in the fourth quarter converging to create what Bitfinex Alpha describes as a “perfect storm” for market activity.

According to the report, Bitcoin has already shown significant price swings, including a recent 6% correction after nearly reaching $70,000. As the U.S. election draws closer, Bitfinex analysts anticipate increased volatility, with many speculating that a Republican victory could boost markets, while a Democratic win may introduce more ambiguity.

Impact on Options Markets

The approach of the election is expected to impact options markets as well. Analysts project rising premiums and daily volatility for both U.S. stock and Bitcoin options as election results approach, with dates of interest around Nov. 6 and Nov. 8. Should former President Donald Trump return to office, his pro-crypto stance could add further momentum to Bitcoin’s volatility.

Heightened anticipation is reflected in the implied volatility (IV) curve, with Bitcoin’s Nov. 8 options pricing in IV above 100 for strike prices over $100,000. High IV generally increases option prices, as sellers require higher premiums to offset potential price swings. The report notes that this trend signals a cautious market outlook, as participants brace for substantial movements in the coming weeks.

Recent options activity also points to market readiness for significant price shifts. Over the past month, December call options with an $80,000 strike price have attracted considerable interest, suggesting market participants are positioning for potential gains by year-end.

Strong Q4 Prospects

Despite recent pullbacks, Bitcoin is demonstrating its typical fourth-quarter strength, historically a bullish period, especially in halving years. BTC has risen over 30% from September lows and posted an impressive 7.29% gain last month, contrasting sharply with its usual September performance. Although pre-election nerves may affect October’s close, Bitcoin’s historical fourth-quarter gains—averaging 31.34%—remain an encouraging sign for potential gains. Notably, Bitcoin has never recorded a bearish fourth quarter in a halving year.

The “Trump trade” factor further influences Bitcoin’s current dynamics. Macroeconomic factors and rising betting odds of Trump’s re-election amplify market uncertainty. Data from RealClearPolitics and Polymarket show Trump’s victory probability at 59% and 64.9%, respectively, further fueling market volatility.

Theo CryptoSlate