Bitcoin Swings Could Intensify if U.S. Election Results Are Controversial

Bitcoin prices fell after an unsuccessful attempt to surpass previous highs on October 29, amid general declines across the altcoin market. This downward trend comes as investors brace for potential volatility surrounding the upcoming U.S. presidential election on November 5, where uncertainty looms in a close race between Donald Trump and Kamala Harris.

The crypto market’s total capitalization fell approximately 2% over the pre-election weekend to $2.23 trillion, with Bitcoin dipping to $67,500 on Sunday. Most top altcoins experienced even steeper declines in percentage terms. Market uncertainty is increasing as the election date approaches, and recent polls show that the candidates are almost equal in their chances to win.

Pre-Elections Volatility Is Decreasing

Historical data indicates that U.S. elections often bring heightened market volatility. For instance, pre-election market swings in the U.S. have averaged 15-20% during presidential election years. However, analysts expect only minor cryptocurrency price fluctuations leading up to November 5, with more intense volatility potentially surfacing after results are announced.

Caroline Mauron, co-founder of cryptocurrency derivatives liquidity provider Orbit Markets, observed that options markets point to an expected 8% price movement in Bitcoin in either direction post-election. This contrasts with typical fluctuations of around 2% on non-election days.

Volatility In the Event of Litigated Results

Maria Carola, CEO of cryptocurrency exchange StealthEX, noted that “volatility could increase after the U.S. presidential election, especially if the results are controversial.” Polls indicate a close race between Trump and Harris, raising the possibility of a contentious or litigated outcome. A headline such as “Harris leads Trump in swing states in latest polls” could easily trigger a downturn in cryptocurrency markets.

For traders, a disputed election could present profitable opportunities, especially for options trading. Periods of high market uncertainty usually attract increased volumes in volatile assets like Bitcoin, making it an appealing target for options traders who seek to leverage sudden price swings.

Carola expects a further correction in Bitcoin prices leading up to the U.S. elections, citing previous election cycles where BTC saw declines of 10.2% and 6.1%. With the BTC price down around 6.3% this November, she observes a recurring pattern that suggests a post-election bull cycle:

“The statistics show an interesting trend — after each election, there was notable growth. Following the 2016 election, the price surged to $1,110, and in 2020, Bitcoin hit a historical high, surpassing $40,000.”

Additional Influencing Factors Beyond the Election

At the same time, factors like the geopolitical landscape, macroeconomic trends, the influx of institutional investors, and the rise of ETFs may play a more significant role than the U.S. elections.

In particular, Joshua Lim, co-founder of crypto derivatives trading firm and liquidity provider Arbelos Markets, believes that the volatility curve suggests a 7-8% move ahead of the week’s big events, most notably the Fed’s rate decision on Thursday and the expected US election results on Friday.

In the coming week, the markets’ attention will be focused on two key events: the US presidential election on Tuesday and the Fed meeting on Thursday. The rate is expected to be cut from 5.00% to 4.75%. Other important events will be the publication of data on the US trade balance and the ISM service index on Tuesday, labor market data on Thursday before the Fed meeting, and the publication of the consumer sentiment and inflation expectations index from the University of Michigan on Friday. The week will end with a speech by FOMC member Bowman with comments on monetary policy.

Key events of the week also include the Chinese government meeting, from which investors expect information on new monetary stimulus packages. However, the situation in the US will remain decisive for crypto assets.