Bitcoin (BTC) Traders Seek Protection Against Price Weakness Amid U.S. Election-Induced Volatility Boom

bitcoin (btc) traders are seeking protection against price weakness amid projections of a u.s. election-induced volatility boom.

U.S. election odds appear to be impacting bitcoin options traders, with a closer look at the CME market revealing a bias toward puts. This preference is evident in the pricing of options expiring within a week, with puts being pricier relative to calls.

The 25-delta risk reversal for contracts expiring Friday (P2XE24) was observed to be -1.3% on Monday, indicating a bias for puts. This measure showcases the difference in implied volatility between out-of-the-money higher strike calls and lower strike OTM puts, offering an easily readable depiction of the market sentiment.

Call options grant the purchaser the right, but not the obligation, to buy the underlying asset at a later date at a predetermined price. Put options, on the other hand, provide the right to sell.

“It looks like bitcoin options traders are hedging their bets to the downside ahead of the U.S. election this week. Through a .25 delta risk reversal we can see that contracts expiring within a week are slightly negative (puts more expensive than calls) compared to longer-dated maturities (either two weeks or 30 days), where the skew flips to being positive again,” researchers at CF Benchmarks told CoinDesk in an email.

Bitcoin's price has dropped to $68,000 from nearly hitting record highs above $73,500 in one week, amid a decline in the chances of pro-crypto Donald Trump winning the election. The pricing for longer-duration options was positively skewed in favor of calls, indicating a broader constructive outlook, which aligns with analysts’ consensus expectations for a year-end rally to $80,000 and higher.

Recent polls indicate that Democrat Kamala Harris and her rival Republican candidate Donald Trump, who is perceived to be crypto-friendly, are running close in most swing states, including Pennsylvania, and also nationally. Some observers say that the 50-50 odds suggest that the eventual outcome, which is expected to be announced on Friday, could lead to a BTC price swing of $6,000-$8,000.

According to data from Amberdata, options trading on the leading exchange Deribit show a broader bullish outlook with a largely neutral bias for this week. The 25-delta risk reversals show barely any difference in the pricing of calls and puts expiring this week. The sentiment turns decisively bullish from the Nov. 15 expiry onward.