- Bitcoin is facing sharp price declines and increased volatility as the US presidential election approaches.
- Bitcoin, which recently hit an all-time high of $73,544, fell to $67,330 today before settling around $67,900.
- A Trump win could send Bitcoin to new all-time highs, while a Harris victory could lead to an initial decline before stabilizing. Long-term or highly competitive outcomes can add long-term volatility.
Cryptocurrency markets are facing heightened volatility as Americans go to the polls. Bitcoin is also experiencing rapid price fluctuations ahead of the US presidential election.
Traders and investors are closely watching the race between former President Donald Trump and Vice President Kamala Harris. This has added a new layer of unpredictability to the already volatile cryptocurrency sector.
Bitcoin, which recently hit an all-time high of $73,544, fell to $67,330 and settled at $67,900, down nearly 9% in a few days.
There was a noticeable shift in market sentiment as traders braced for potential price movements and hedged against a potentially turbulent period following the election.
Bitcoin’s implied volatility index, a key measure that reflects expected price movements, surged 64.06% on a year-to-date basis, hitting its highest since July, according to data from Deribit, the largest cryptocurrency options exchange. This indicator, which captures expected movements over the next 30 days, highlights the growing uncertainty as markets brace for the immediate impact of the election results.
Alexander Blume, CEO of digital asset company Two Prime. They note that the race’s razor-thin voting margins have added to traders’ uncertainty. With election polls shrinking after President Trump’s late surge, Blume suggests the market’s current decline reflects a cautious approach among investors who may be “moderating their views and risking the events.”
“Similar to what we see in Two Prime’s strategy, many traders are waiting to see what happens before making a major move,” explains Blume. “This election could trigger significant volatility, but markets seem hesitant until there is more clarity.”
Market sentiment: Options market and retail speculation surge
The high implied volatility of Bitcoin options raises widespread caution. Implied Volatility Index, essentially a “fear gauge” for the cryptocurrency market, is rarely this high outside of major market events. This means: Traders are bracing for everything from a mild post-election uptick to a severe recession.
Blume emphasizes that while institutional investors are likely to base their strategies on broad market fundamentals, retail traders, who often rely on prediction markets and betting odds, can be disproportionately affected by political developments.
“As election prediction markets like Polymarket narrow, retail-focused speculation is ramping up,” Blume says. “Institutional investors are wary of relying too heavily on betting odds that have not yet been proven to be reliable indicators of major asset movements.”
Election Results: Bitcoin Price Trajectory Scenario
Blume outlined potential scenarios for Bitcoin based on various election results. If Trump secures the presidencyHe predicts a sharp rally that will likely push Bitcoin past recent highs as market sentiment interprets Trump’s victory as favorable for risk assets.
“If this happens, we will almost certainly see a new all-time high as investors interpret the results as a green light for risky assets,” Blume said.
Alternatively, If Harris wins, Blume expects an early sell-off. He said the Bitcoin price could fall into the $50,000 range, although he expects the market to recover as it adapts to the new government’s policies.
“I believe there will be a gradual recovery once the initial response calms down,” he said. “This is especially true if policies are considered friendly or neutral towards cryptocurrencies,” he adds.
But the possibility of an unresolved election could add significant confusion. Disputed results or extended delays are likely to trigger prolonged volatility, Blume warns. “Instability is generally negative for markets, so an overdue decision will probably lead to a downturn. “Investors do not respond well to uncertainty, especially in asset classes as sensitive as cryptocurrencies.”
Cryptocurrency markets reflect broader economic concerns
This surge in volatility also reflects broader economic concerns. The election coincides with key economic indicators, including inflation data, Federal Reserve policy, and recession fears that could impact the near-term dynamics of the cryptocurrency market. In this context, the current surge in volatility reflects not only political uncertainty but also heightened anxiety about economic stability.
In recent weeks, the Bitcoin market has seen significant volatility due to a variety of factors ranging from macroeconomic pressures to geopolitical tensions. But now, with the election just around the corner, many investors are reluctant to make large bets, opting instead to hedge positions and wait for clear signals from the U.S. political environment.
Whether an immediate reaction or delayed impact, the outcome of this election will likely shape Bitcoin’s trajectory in the coming months. In an unpredictable environment, traders are preparing for major moves, with Blume and other industry experts recommending a cautious, wait-and-see approach.
Also read: How will Bitcoin gain traction in the US presidential election?