Bitcoin Traders Hedging against Donald Trump Jail Sentence with $17B Options

Bitcoin Price Analysis:

Bitcoin price fell to a 20-day low of $55,633 on Sept 4 down, 14.4% in the last 10-days. Markets data shows how BTC bull traders are increasingly making hedged bets against a possible crash towards $35,000 amid uncertain economic and political landscape in the USA.

Bitcoin Price Tumbles Lower as Trump Campaign Waivers

For many cryptocurrency stakeholders and enthusiasts, Donald Trump quickly emerged the frontrunner for the 2024 US Presidential Elections. The Republican candidate has promised support for the sector across various speeches in recent month US borders.

Over the last 4-years, the Joe Biden regime has instigated a flurry of lawsuits against top crypto entities including Binance, Ripple and Coinbase. Hence, the The outgoing administration is largely perceived to have stifled the growth of crypto sector with US borders.

Consequently, having promised a more Crypto-friendly stance, Trump’s campaign trail has become closely intertwined with BTC price action in recent weeks. This positive correlation between Trump campaign progress and the Bitcoin pice action became pronounced in July 2024.

On July 13, Trump survived a shooting during Parkland campaign rally, while Biden bowed out of the race on July 21.

The blue-shaded area in the chart above shows how BTC price rallied 21% between July 13 and July 29, as Trump media run peaked with a bullish speech at Bitcoin Nashville 2024 conference on July 27.

However, the Trump campaign now faces a major hiccup ahead, and it has Bitcoin prices negatively this week. Back in May 2024, Trump convicted in May by a Manhattan jury on 34 felony counts of falsifying business records.

On Tuesday Sept 2024, US District Judge Juan Merchan rejected Trump’s motion to transfer the New York hush money case to a federal court and delay sentencing till after the Nov 5 Presidential Election. He is now scheduled to be sentenced Sept. 18.

As expected, bearish headwinds from the uncertainty Trump’s sentencing has triggered negative reactions across the crypto markets. In fact, the impact appears to have nullified the bullish tailwinds from the widely-anticipated Fed rate cut expected to be announced during the FOMC meeting on Sept 17.

Indicatively, the red-shaded area in the BTC price chart above shows how BTC price fell 14.4% over the last 10-days, with Trump’s legal squabbles compounding bearish pressure.

Less than 24 hours after US Judge Merchan announced Trump’s sentencing date on Tuesday, BTC price tumbled to a 20-day low of $55,633 by mid-day Sept 3.

Bitcoin Options Market Growing Bearish Sentiment

Bitcoin price has now rebounded towards the $56,740 area at the time of writing on Sept 5. However, critical derivatives markets data shows bull traders are increasing placing cautious bets, hedging against a potential Bitcoin crash if ongoing legal squabbles impair Trump’s campaign hopes.

More so, the US SEC issued a wells notice to AI chips giant, NVIDIA, leading to a wider $300 billion sell-off that saw equities lose $1 trillion in market capitalization within a 24-hours.

The impending release of the U.S. jobs report on Friday also has traders on edge, as the figures will be pivotal to the next Fed Rate decision slated form Sept 17.

In addition, September has been a challenging month for Bitcoin, with an average decline of more than 8% over the past five years.

These bearish catalysts, and heightened economic uncertainty have triggered a spike in demand of Bitcoin options, reflecting growing anxiety among long-term investors.

A surge in demand for these hedges, particularly in reaction to the upcoming jobs data and the November presidential election.

One notable trend is the growing interest in options contracts expiring on November 29 at a strike price of $35,000, which suggests that some investors are hedging against the possibility of pro-crypto presidential candidate Donald Trump losing the race for the White House.

– Sean McNulty, director of trading at liquidity provider Arbelos Markets.

Bitcoin options are derivative contracts that give traders the right, but not the obligation, to buy or sell Bitcoin at a specified price before a predetermined expiration date.

These contracts are often used to hedge against price volatility or to speculate on future movements of BTC.

Between Sept 1 and Sept 5, open interest in Bitcoin options fell from $20.1 billion to $17.8 billion—a decrease of 11.4%. This suggests traders are closing positions or reducing exposure to potential downside risks. At the same time, options trading volume surged by 600%, jumping from $209.87 million on Sept 1 to $1.54 billion by Sept 5.

Typically, such a pattern—where rising volume coincides with falling open interest—signals that traders are utilizing short-term hedging strategies. This activity is often a response to heightened risk, as seen in early 2022 when a similar trend preceded a sharp decline in Bitcoin’s price.

Further compounding bearish sentiment, options contracts with a $35,000 strike price expiring in November have seen increased demand.

Hence, trends observed in the BTC options markets this week, validate the narrative that investors are hedging against volatility risks posed by macroeconomic events like the upcoming U.S. Non-Farm Jobs report slated on Friday, Sept 6, and uncertainty surrounding Trump’s sentencing on Sept 18.

More so, historical data shows that September has traditionally been a bearish month for Bitcoin, with an average price decline of 8% over the past five years.

Bitcoin Price Prediction: Bulls Must Clear $64k to Regain Control

Based on the current market dynamics, Bitcoin bulls face a daunting challenge ahead. Technical BTC price indicators further emphasize this bearish outlook.

The Bollinger Bands chart below, shows BTC price is currently trading below the midline of $59,895, a key resistance level. The recent 14.4% decline within the last 11 days underscores growing bearish momentum.

To reverse the bearish trend, bulls would need to push BTC price above the upper Bollinger Band, currently positioned around $64,314. Failing to break this key resistance level could lead to further downside, with critical support at $55,476. If that support fails to hold, a deeper correction towards the $53,000 range is likely.

Considering the prevailing macroeconomic and political risks, Bitcoin bulls may struggle to regain control unless they can decisively break the $64,000 barrier. Without this momentum, bearish pressure may continue to weigh on the BTC price, with the Trump sentencing and Fed decision likely acting as key catalysts in the days ahead.