QCP Capital: Bitcoin is expected to fluctuate by about 3.5% on election night, and the market may underestimate the risks after the election

On November 5th, Singaporean cryptocurrency investment firm QCP Capital published an article stating that as the most closely contested presidential election in US history is about to take place, anxiety in the stock market, bond market, and cryptocurrency market has become increasingly evident. The "Trump trade" (betting on a strong US dollar, rising cryptocurrencies, and increasing bond yields) has gradually heated up on the eve of the election, thanks to Trump's leading position in the prediction market. However, if Harris wins, these gains may be quickly wiped out, causing the market to experience drastic fluctuations overnight. The cryptocurrency market is currently expected to experience a fluctuation range of around 3.5% in the spot price of Bitcoin on election night. However, traders may underestimate the post-election risks: the lack of volatility premium after November 8th indicates that the market expects to quickly obtain the election results, but may underestimate the impact of potential delays or controversial results.

The results of the congressional elections are equally important and may even have the same impact as the presidential election results. If the Republican Party wins big, it may mean that future fiscal deficits will be higher, prompting the Federal Reserve to take a more hawkish stance, which is undoubtedly a disadvantageous situation for risk assets. On the contrary, if the legislature is divided, the market may be more stable, and volatility may gradually decrease.

Currently, the options market shows a balance between bullish and bearish options. In the past few days, there has been a lot of buying activity in both bullish and bearish options. However, Bitcoin is still considered part of the "Trump trade". On Monday, as a large amount of funds flowed out of the spot ETF, the spot price of Bitcoin fell, which is consistent with the results of a poll showing that Harris has a slight lead in Iowa. As the election results are gradually announced tomorrow, it is expected that the spot price of Bitcoin will experience drastic fluctuations.