Bitcoin: Analysts Warn of Crypto Volatility in the Weeks Surrounding US Election

On October 30, surged to $73,620 on Binance, just $157 below its all-time high, before settling around $71,800. Volatility has increased, with the index moving from 1.5% to 1.62% over the last 48 hours.

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Despite bullish sentiment for November, analysts note that the approaching U.S. presidential election could prompt a correction due to potential economic policy shifts and dollar fluctuations. The Fear and Greed Index has reached the “extreme greed” zone for the first time since early June, rising from 72 to 77 points out of 100 and hinting at the market’s readiness for a correction. Additionally, options trading activity, particularly above the $100,000 mark, hints at increased volatility through early November.

Market uncertainty is intensifying among cryptocurrency investors, especially as Election Day approaches, with other key factors in play. Morgan Stanley warns that volatility could arise from prolonged vote counts, economic uncertainty, and unpredictable voter behavior.

“Delayed election results introduce a period of uncertainty and speculation, which historically has resulted in elevated levels of short-term market volatility. Given tight polling margins in swing states, our base case is that an election delay could last days or even weeks,” the report said.

Special attention is being paid to short-term volatility, which is now higher than long-term indicators. Traders are aggressively adding to positions with an eye on the $80,000 mark, looking to maximise profits from rising market volatility. According to data firm analytical company Derive, the odds of a 20% swing on election day are estimated at one in three. Derive founder Nick Forster cautioned that while there could be upside, the risks are equally significant:

“The increased buying of calls indicates some traders are indeed betting on a bullish outcome, potentially expecting a ‘buy the rumor’ scenario, but the reality could pivot quickly to a ‘sell the news’ dip depending on actual election outcomes.”

Pav Handal, lead analyst at cryptocurrency exchange Swyftx, expects the crypto market to drop sharply following the US election, adding that “the underlying market fundamentals are pointing toward growth”.

According to Forster, it remains unclear whether traders should expect a ‘buy the news, sell the rumor’ reset after the election or a surge in the crypto market if Trump wins.

Forster noted that traders who can implement a diversified strategy, including hedging options, would be better off than outright buying, especially given the market’s high sensitivity to domestic and global news.

Other analysts point out that Bitcoin could test a short-term dip, but it won’t be significant. According to Pauline Shangett, CMO at crypto exchange ChangeNOW, “a major drop is unlikely since Harris’s stance on crypto is fairly predictable and already factored into most large investors’ strategies”.

Shangett also added that volatility is possible regardless of the elections’ results:

“Past events show that political outcomes often catalyze price swings in Bitcoin. Tying market sentiment to election results creates a “Trump Trade” phenomenon, where a candidate’s victory influences crypto prices. Bitcoin may experience heightened volatility regardless of the winner, creating unique opportunities for strategic investors.”

Despite potential price dips, an ATH could be reached as early as this week. Maria Carola, CEO of the StealthEX crypto exchange, expects a target of $73,680 in the coming days:

“As a correction test failed with the $70,020 support level, Bitcoin is now moving towards $73,860, a target it could potentially reach by the end of the week.”

Carola added: “A supportive factor for growth includes a relative strength indicator test of support. A reversal towards a bearish outlook would require a breakdown below 69,065, indicating continued declines with a target near 65,670. Alternatively, a breakout above $72,500 could affirm continued upward momentum, which will last till the US presidential elections.”