Crypto traders might be underestimating post-election risks, potentially delaying the resolution of market volatility. The outcome of congressional races could impact Federal Reserve policies and the stability of various assets. As the much-anticipated U.S. presidential election unfolds, tension is building across stocks, bonds, and the crypto market, with investors bracing for potential turbulence in what is expected to be a highly contested race. Bitcoin remains in the spotlight, widely regarded as part of the so-called “Trump trade,” according to reports from QCP.
The “Trump trade,” which involves long positions in the U.S. dollar, cryptocurrencies, and rising Treasury yield bets, has gained traction due to Trump’s current edge in betting markets. However, if Harris were to win, these trends could quickly reverse, sparking sharp market reactions overnight.
Additionally, the crypto community is anticipating a possible 3.5% swing in Bitcoin prices on election night. Despite this, there are growing concerns that traders may be overlooking risks beyond Election Day. The lack of a volatility premium extending past the November 8 options expiration suggests the market expects a smooth outcome, possibly underestimating the potential for delays or disputed results.
Historical Patterns and Market Reactions:
History reveals how unpredictable election outcomes can be. In 2016, Donald Trump’s unexpected win led to an initial drop in U.S. futures, followed by a swift rebound with increased trading volume in the days after. Similarly, Joe Biden’s victory in 2020 took four days to confirm, leading to the highest trading activity seen in half a year.
Aside from the presidential race, the congressional outcomes are equally important. A Republican victory in Congress could suggest increased fiscal deficits, prompting a more hawkish Federal Reserve stance and putting pressure on risk assets. Conversely, a divided Congress may create a more stable environment, potentially reducing market volatility.
In crypto options, there’s a balanced activity between calls and puts, with significant interest on both sides. As polling concludes and results come in, traders expect Bitcoin to see unpredictable price fluctuations, with the market responding to real-time political developments.
