Tuesday night, most US financial markets will be closed as states count votes in a high stakes election between Donald Trump vs. Kamala Harris.
The crypto market will still be active and investors can react to election results in real time.
Bitcoin, which is often seen as an indicator of confidence in alternative investments and could see gains if Trump has an excellent night, is primed to make gains.
Analysts’ Bitcoin price expectations in a scenario post-election
Analysts at Bernstein led by Gautam Chugani expect that a Trump victory could boost Bitcoin’s price above $80,000 in the next two months.
If Harris wins, they predict that Bitcoin could fall to $50,000.
Bitcoin was trading at around $67.870 on Monday. This is a slight drop from the high of last week, which was near $73,000. It reached $70,000 on February 2.
Harris has not yet made any definitive policy commitments, despite his support for a regulatory framework.
Standard Chartered analyst Geoff Kendrick said that if Harris won, Bitcoin could close the year at around $75,000 while a Trump win could push it to $125,000.
Analysts have highlighted that forecasting Bitcoin price is inherently difficult as it is driven more by market sentiment, perceived future value and earnings than conventional metrics.
Should you trade if volatility is expected, regardless of the outcome?
Crypto traders are bracing themselves for volatility after the election, according to a CF Benchmarks Index that tracks futures activities to gauge expected volatility for Bitcoin over the next 30 days.
This index rose to its highest level on Monday since early August. This indicates that price swings are expected to be more volatile.
Analysts expect market movements regardless of election results, with a bullish outlook if Trump wins.
It is still up to the jury whether trading election results in real time would be a smart move or not.
Arthur Hayes, a veteran of the crypto industry, said he does not intend to trade on the US Presidential election despite the volatility that could be brought by it.
Hayes, in the latest Unchained episode of the podcast, explained that he would rather avoid the risk of an election night by choosing a more peaceful activity like stretching in his Yoga room.
Hayes believes that election trading is unattractive due to its unpredictable returns. He compared chasing after election trades with “trying eke out few percentage points,” a risk he felt didn’t justify.
He said that even if his prediction is correct, the short-term market reaction can be unpredictable, leading to possible losses, even with a correct call.
Crypto traders should be aware of the following metrics on election night
Several indicators can reveal how the crypto markets will react to the election results:
Tick trades data
Kaiko, an international crypto data provider, recommends that you monitor tick trade data. This data records every buy and sale across all crypto markets.
Kaiko said that this data was useful in the first debate, and will be just as useful during the election.
During the debate CVD turned negative, signaling a bearish reaction to Trump’s performance. Harris was then seen as potentially unfavourable for cryptocurrency.
Most traders and large organizations will be monitoring results using proprietary tools to gain an edge.
It said that observing ticks on major platforms can provide insight into the “smart money’s” movements.
Funding rates
On election day, it will be important to monitor funding rates.
Binance adjusts its rates every eight hours starting at midnight UTC. On election day, rates will be updated at mid-day (12 PM ET) and after the East Coast voting closes (8 PM ET).
The next adjustment will be made at 4 AM on Wednesday, November 6th. By then, the outcome of the election may be more clear. Liquidations could be triggered by significant spot market movements, depending on the results at that time.
Traders will be very sensitive to changes in funding rates, especially those who have highly leveraged positions. Kaiko said that sudden spikes in rates can lead to squeezes and cascading liquidity.
Implied Volatility
Kaiko said that Implied Volatility is another important derivatives metric. It provides a forward-looking estimation of an asset’s volatility over a specified period, making it essential for gauging market risk.
The IV term structure can be a great source of information.
When short-term IV exceeds long-term, it creates a term structure that is inverted, which often signals a high probability for a near-term event such as the US elections.
In this case, the recent surge of nearly $73,000 likely caught traders by surprise, causing them to adjust their exposure prior to Tuesday’s result.
These metrics will provide valuable insight for investors who are navigating the cryptomarket during an election period that is expected to bring new levels of volatility.
This post Crypto markets open for election night: What you need to know about real-time updates first appeared on ICD
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