Cryptocurrency markets are buzzing with anticipation ahead of the US presidential election, with Bitcoin flirting with its all-time high despite mixed economic data and a strengthening US dollar. According to a new analysis from QCP Capital, the market remains highly volatile, with traders hedging their bets amid uncertainty surrounding the election outcome.
Last week saw a rollercoaster of economic news. Thursday’s Core PCE inflation reading came in slightly hotter than expected at 2.7% year-over-year, versus a forecast of 2.6%. Friday’s Non-Farm Payroll (NFP) figures, however, delivered a significant downside surprise, showing only 12,000 jobs added compared to the 110,000 expected. This weaker-than-anticipated jobs report caused the US Dollar Index (DXY) to rebound and reclaim the 104 level. Despite the weak NFP print, the US unemployment rate held steady at 4.1%.
The market’s expectation of a 25 basis point rate cut by the Federal Reserve in November has now risen to a 96.4% probability. Equity markets closed Friday in positive territory, boosted by strong earnings from Amazon (AMZN). US Treasury yields, which initially dipped in reaction to the NFP data, subsequently rallied to a four-month high, suggesting caution among investors ahead of the election. Brent and WTI crude oil prices saw modest gains on reports of potential geopolitical tensions in the Middle East.
Bitcoin (BTC) briefly touched a high of $73,600 on Tuesday night, fueled by pre-election anticipation. However, it retreated below $69,000 on Friday. Ethereum (ETH), on the other hand, experienced a more muted performance, failing to break above the $2,700 level. This divergence occurred against a backdrop of strong inflows into Bitcoin ETFs, with over $2.1 billion in net inflows recorded throughout the week. BlackRock’s iShares Bitcoin Trust (IBIT) saw a single-day net inflow of $872 million, its largest since its launch in January.
Despite Friday’s dip, QCP Capital notes continued significant interest in the cryptocurrency market. Open interest (OI) for both Bitcoin futures and options remains elevated at $40.65 billion and $25.3 billion, respectively. Short-term implied volatility for both Bitcoin and Ethereum remains high, exceeding 72%, reflecting the market’s anticipation of potential price swings during election week. The increasing put skew suggests traders are actively seeking downside protection.
Looking ahead to election week, QCP Capital anticipates a “sell-the-news” event, similar to the market reaction following the Bitcoin conference in Nashville. While former President Trump remains the favorite in some prediction markets, his lead has narrowed considerably.
