Derivative traders appear to be preparing for a bullish trend in Bitcoin in the days following the US election on November 5.
Author: Chandler, Foresight News
The 2024 US presidential election will come to a close on November 5, with the race between Kamala Harris and Donald Trump still hotly contested, with the situation remaining deadlocked.
Based on past experience, polls have an indicative effect on the election, and the US political forecasting website RealClearPolitics (RCP) shows that if the current state polls were to vote, Trump and Harris would have locked in 219 and 215 votes respectively for their respective camps.
Looking at the poll average, Trump's approval rating has already surpassed Harris, exceeding her by 0.4 percentage points.
In addition, the Polygon-based prediction market Polymarket has seen Trump's probability of winning rise to 67%, while Harris' probability has fallen to 33.1%, with Trump leading by 33.9 percentage points. According to Lookonchain monitoring, in October, 10 whale addresses on Polymarket spent a total of $70.6 million betting on Trump winning the US election.
However, the current odds on Polymarket do not fully reflect the true thoughts of American voters.
According to Bloomberg, Polymarket has confirmed that the large whale FREDI9999, who has heavily bet on Trump's victory, is a French trader. As of October 24, four accounts named FREDI9999, Theo4, PrincessCaro and Michie have placed major bets on Trump's victory, with the potential payout totaling about $46 million.
Polymarket stated that the company has conducted an investigation and concluded that the trader is betting based on their "personal views on the election" and found no evidence that the user is manipulating or attempting to manipulate the market.
In addition, Fortune magazine has also recently reported that analysts from blockchain companies Chaos Labs and Inca Digital have found rampant wash trading on Polymarket, with evidence of fake trading activity where buying and selling are often done simultaneously and repeatedly to create the illusion of trading volume and activity. Chaos Labs found that fake trades account for about a third of the trading volume in Polymarket's US presidential election market, while Inca Digital found that a "significant portion" of the market's trading volume may be attributed to potential fake trades.
Inca estimates the actual trading volume of the presidential election prediction market to be around $1.75 billion, while Polymarket reported $2.7 billion. Chaos Labs attributed this to Polymarket conflating stock trading with US dollars.
It is also worth noting that in the US presidential election, the Electoral College system means that the nationwide popular vote support does not determine the final outcome, and the polls in the key swing states are the core of the election situation. Even if a candidate wins more votes nationwide, they may still lose the election if they fail to win the Electoral College votes in the key states. Therefore, the voter sentiment in the swing states is more crucial than the nationwide popular polls, as these states often play a decisive role in the election outcome.
How the traditional financial market views the election
On October 29, the US Nasdaq Composite Index rose 0.78% to close at 18,712.75, a new all-time high. On October 30, the major US stock indices closed slightly lower, with the Nasdaq ending its four-day winning streak, down 0.56%. From the sentiment of traders and investors in the market, with only a week to go before the US presidential election, the market is preparing for the possibility of Trump's return to the White House. Phillip Wool, head of portfolio management at Rayliant Global Advisors, said Trump's chances of winning the presidential election are increasing, which is positive for the US stock market in the short term. He pointed out that the fiscal deficit will increase and inflation will rebound, which may slow the pace of interest rate cuts by the Federal Reserve, and all of this will put upward pressure on the US dollar.
At the same time, the latest valuation of Trump's social media platform Truth Social has already surpassed Musk's social media platform X. As of the close on October 29, the stock price of Trump Media & Technology Group, the parent company of Truth Social, has soared 324% from its recent low on September 24, with a market capitalization of $10.3 billion. However, it also saw some pullback on the 30th, with its market value returning to around $8 billion.
The US 10-year Treasury yield briefly rose to 4.34% earlier on the 29th, the highest level since early July, and closed at 4.28% on the 30th. The spot price of gold in London reached a new all-time high of $2,798 per ounce.
Bitcoin surged to $73,600 (the highest since March) before pulling back slightly, currently trading around $72,500, near its all-time high.
However, the election situation is far from a foregone conclusion. According to Shenwan Hongyuan's analysis, in the short term, if Trump is elected, the continuation of the previous trading may be relatively limited, but if Harris wins, the previous trading may see a significant reversal. Looking back at history, the predictions of the betting market on the election outcome are not reliable, with 5 out of 22 presidential elections since 1936 failing to make the correct prediction; polls also have their flaws.
This year, the continuation of mail-in ballots, the post-pandemic migration of urban and rural populations, and the new biases produced by the revised polling models for Trump may all contribute to the uncertainty of the outcome, but the market trading has clearly tilted towards Trump. This means that if Trump is elected, the market trend may be similar to 2020 and 2012, with a slight continuation of the previous trading; but if Harris wins, the market may see a sharp reversal, similar to 2016.
Crypto market: High open interest awaiting a breakout
Currently, the open interest in the crypto market has risen significantly, especially in the Bitcoin options and futures space, indicating investors' strong expectations for the upcoming US election and subsequent market volatility. Luuk Strijers, CEO of Deribit, pointed out that derivative traders are preparing for a bullish trend in Bitcoin in the days following the US election on November 5.
Strijers said: "For options expiring on November 8, the open interest value exceeds $2 billion, with the main strike prices at $70,000, $75,000 and $80,000, and a put/call ratio of 0.55, indicating that the number of outstanding call options is twice the number of put options. Compared to Mark IV, the Forward IV has a clear increase, especially during the election cycle, indicating that traders expect higher volatility. The implied volatility is 72.29%, suggesting that prices may fluctuate around 3.78% in the days following the presidential election."
Bitcoin options open interest has risen to a near half-year high
Data source: Coinglass
Strijers added that the peak in implied volatility is temporary, indicating that the market does not expect long-term uncertainty. The 25 Delta Skew (put options - call options) is negative across the board, suggesting that the market expects a greater upward trend, with a stronger bullish sentiment. Compared to put options, the demand for call options is strong, and investors are not too concerned about managing downside risk.
Looking at the data of Bitcoin spot ETFs, on October 29, the total net inflow to Bitcoin spot ETFs was $870 million, the third highest single-day net inflow on record. The other two highest net inflows were $1.05 billion on March 12 and $887 million on June 4.
As of the time of writing, the total net asset value of Bitcoin spot ETFs is $72.545 billion, and the ETF net asset ratio (market cap to total Bitcoin market cap) has reached 5.07%, the first time it has exceeded 5% in history.
The Bitcoin spot ETF had the third highest single-day net inflow in history on October 29
Data source: SoSoValue
In addition, the open interest (OI) of BTC futures contracts reached a new high in US dollar terms on the 29th. The OI of BTC futures saw the largest single-day increase since June 3, with an increase of over 20,000 BTC in a single day.
Daily change in open interest of futures
Data source: Glassnode
Open Interest (OI) refers to the total number of outstanding derivative contracts (such as futures or options) that have not yet been closed. Higher open interest usually indicates higher market attention to the particular asset. When open interest increases with rising prices, it means new capital is flowing into the market, which is often seen as a signal of trend strengthening. This has been the case in the recent trading sessions.
As of the time of writing, the total open interest in BTC has reached $43.468 billion. Over the past two days, the open interest on CME has exceeded 170,000 BTC, worth over $12.549 billion, accounting for about 30% of the futures market. Binance's BTC futures have an open interest of over 127,100 BTC, worth over $92 million, accounting for over 20% of the market.
CME's BTC contract open interest is approaching a new high
Data source: Coinglass
Overall, the traditional market and the crypto market are currently showing a certain optimistic sentiment, and some traders seem to be positioning for the "Trump trade" opportunity again. In the short term, political uncertainties during the election period often lead to significant price volatility. These fluctuations are driven not only by voters' expectations of the candidates' policies, but also by the market's reaction to changes in the economic fundamentals. However, in the long run, the pricing of assets still mainly depends on fundamental factors, and the impact of elections on the market is usually realized through changes in the fundamentals.
