Bitcoin and Ethereum: Volatility Spikes as November U.S. Election Approaches
Bitcoin and Ethereum – Ethereum’s options volatility has surged ahead of Bitcoin’s as traders brace for increased uncertainty tied to upcoming regulatory decisions in the U.S. With the November election fast approaching, this volatility gap has widened, indicating significant expectations around decentralized finance (DeFi) regulations.
Implied Volatility and Trader Sentiment
Ethereum’s implied volatility for 30-day at-the-money contracts has grown to nearly 7% above Bitcoin, according to Nick Forster, founder of DeFi derivatives protocol Derive. These at-the-money contracts reflect a position where the strike price is close to the asset’s current market price, signaling traders are preparing for substantial price shifts.
Both Ethereum (ETH) and Bitcoin (BTC) had nearly identical volatility levels last November. However, with just a few weeks before the U.S. election, traders are positioning for increased volatility, with Ethereum leading the way. “Ethereum’s heightened volatility is a direct reflection of traders’ expectations for increased uncertainty, especially as we approach the election,” Forster explained. As the number two crypto asset by market cap and a leading platform for smart contracts, Ethereum is crucial for powering DeFi protocols and projects, making it more sensitive to upcoming policy decisions.
Volatility Spikes Expected in Late October
Significant spikes in forward volatility are anticipated between October 25 and November 8. Ethereum’s forward volatility is projected to hit 76.6%, compared to Bitcoin’s 69.8%, further reinforcing expectations of heightened price action. This means traders are expecting more dramatic movements in Ethereum prices than in Bitcoin during this period.
While both assets are currently trading with neutral skews (around zero), Bitcoin is beginning to show slight divergence, signaling mild bullish sentiment for the world’s largest cryptocurrency.
Bitcoin’s Seasonal Strength and Price Outlook
“Bitcoin is entering a period of positive seasonal performance,” according to a CryptoQuant spokesperson, “often seeing gains in Q4 during bull cycles.” With recovering demand and favorable seasonality, Bitcoin could potentially target $85,000 to $100,000 in the fourth quarter. The timing is important, as this period coincides with the U.S. election, adding to market uncertainty but also presenting potential upside.
U.S. Election and Regulatory Uncertainty
Both Vice President Kamala Harris and former President Donald Trump have engaged with the crypto industry as part of their campaigns to sway voters. Trump is perceived as more favorable towards crafting policies that provide clarity to the industry, while Harris’s stance on the subject remains somewhat ambiguous.
This political uncertainty plays into the current volatility, particularly for Ethereum, with traders anticipating regulatory shifts that could significantly impact the DeFi sector. “Traders seem more confident in Bitcoin’s ability to weather these macro events,” Forster added.
FAQ
Why is Ethereum’s volatility higher than Bitcoin’s ahead of the U.S. election?
Ethereum’s implied volatility has surged due to trader concerns about potential regulatory changes following the U.S. election, particularly in relation to decentralized finance (DeFi). This uncertainty has led to more pronounced price swings for Ethereum compared to Bitcoin.
Leave a comment