Crypto Investors Are Cautious Ahead of US Elections

Bitcoin (BTC) investors are trying to protect against price weakness while expecting a surge in volatility due to the US elections.

Put options, which offer protection against price declines and expire within a week, are up significantly from yesterday, according to CME’s bitcoin options market.

The probability of a 25 delta risk reversal for contracts expiring on Friday (P2XE24) was -1.3% yesterday, indicating a bias for selling.

Researchers at data platform CF Benchmarks summarize the situation as follows: “Bitcoin options traders appear to be keeping their bets on the downside ahead of the US elections. “With the 25 delta risk reversal, we can see that contracts expiring within a week are negative, which falls into the region where skewness returns to being positive compared to longer term maturities of 2 weeks or 30 days.”

Bitcoin’s price has retreated from record highs of over $73,500 to $68,000 within a week.

Pricing on longer-dated options was positively skewed, indicating a more comprehensive and constructive outlook, consistent with consensus analysts’ expectations for a year-end rally to $80,000 and higher.

Latest polls show Democrat Kamala Harris and her rival, Republican candidate Donald Trump, neck and neck in most states, including Pennsylvania and nationally.

According to some observers, a potential 50-50 ratio means the outcome, which is expected to be announced on Friday, could lead to a $6,000-8,000 surge in BTC price.

Options trading on derivatives exchange Deribit also supports a broader bullish outlook for this week with a largely neutral bias, according to data platform Amberdata.

A 25 delta risk reversal shows almost no difference in the pricing of options expiring this week. Market sentiment has been steadily upward since November 15.