As the U.S. presidential elections draw near, the cryptocurrency market is witnessing a surge in speculative activity, with traders locking in significant amounts of capital in bitcoin (BTC) options tied directly to the election results. The options, known as “election expiry options,” are set to settle four days after the November 4 elections, and have already garnered substantial attention and investment.
Record-Breaking Open Interest in Bitcoin Options
Deribit, a leading cryptocurrency derivatives exchange, introduced these election expiry options a month ago, and they have quickly become a focal point for traders seeking to capitalize on potential market movements spurred by the election outcome. As of now, the notional open interest—representing the total dollar value of active options contracts—stands at a staggering $345.83 million, according to data from Amberdata.
This surge in open interest is a clear indicator of the high stakes and expectations surrounding the upcoming election, as traders anticipate significant volatility in the cryptocurrency market. The majority of these options are call options, which account for 67% of the total open interest. Call options are favored by traders who expect prices to rise, as they offer unlimited upside potential with limited downside risk. The remaining 33% are put options, which provide protection against price drops.
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Bullish Sentiment Dominates
The current put-call ratio of less than 0.50 highlights the overwhelmingly bullish sentiment among traders, with twice as many call options as put options. This ratio reflects the market’s optimism that the election results could lead to a surge in bitcoin prices, with many traders positioning themselves for a potential rally.
Algorithmic trading firm Wintermute noted in a recent report that these election-dedicated contracts allow investors to strategically bet on how the election might impact the crypto markets. “The concentration of call options’ open interest at strikes around $80K and $100K suggests that market participants are positioning for potential upside in bitcoin, while the presence of puts at lower strike prices of $45,000 indicates some level of hedging or downside protection,” Wintermute explained.
Speculating on a Post-Election Rally
The most popular strike price for call options is $80,000, with over $39 million in open interest. This suggests that many traders are banking on bitcoin reaching new all-time highs in the wake of the election. Additionally, open interest is primarily concentrated in higher strike prices ranging from $70,000 to $140,000, indicating widespread anticipation of significant price appreciation.
On the other hand, $39 million is also locked in the $45,000 put option, reflecting some traders’ cautious approach and desire for downside protection in case of adverse market reactions.
Also Read: Lawmakers Push CFTC To Ban Election Betting: $1 Billion In Wagers Threaten U.S. Democracy
As the U.S. elections approach, the crypto market is set for a potentially volatile period, with traders closely watching the political landscape and positioning themselves for what they hope will be a lucrative post-election rally. Whether this bullish sentiment will translate into actual gains remains to be seen, but for now, the stakes are higher than ever.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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