Brace Yourself—Bitcoin (BTC) Volatility Expected to Surge With U.S. Election

Bitcoin (BTC) climbed close to $73,600 this week, inching toward record highs ahead of U.S. election week, with a major boost from strong exchange-traded fund (ETF) inflows.

Bitcoin price approached $73,600 this week as it headed toward record highs ahead of the U.S. election week, largely driven by strong exchange-traded fund (ETF) inflows, QCP Capital’s latest weekend report showed.

Brace Yourself—Bitcoin Volatility Set to Spike With U.S. Election

In its weekend market analysis, QCP highlighted mixed signals from recent U.S. economic data. The core Personal Consumption Expenditures (PCE) index—a key gauge for inflation—came in just above expectations at 2.7% year-over-year, higher than the 2.6% predicted.

However, QCP analysts noted that the Non-Farm Payroll (NFP) report showed an unexpected decline, adding only 12,000 jobs compared to the 110,000 anticipated. Despite the surprising NFP numbers, the U.S. unemployment rate remained steady at 4.1%, leading to a surge in market expectations for a Federal Reserve rate cut in November, now seen as having a 96.4% probability.

The Fed is set to cut rates by a quarter point two days after the election. QCP analysts noted that despite these contrasting signals, U.S. equities ended Friday in the green, supported by strong earnings from Amazon.

Moreover, QCP showed how U.S. Treasury yields initially fell in response to the NFP report but quickly reversed, climbing to a four-month high.

In commodities, oil prices edged up higher amid rising geopolitical tensions, with reports of a possible Iranian response to Israel. Bitcoin (BTC) continued its ascent, inching closer to its all-time high, while ether (ETH) remained relatively muted. QCP analysts attributed bitcoin's recent performance to strong ETF inflows, with over $2.1 billion flowing into bitcoin ETFs during the week.

Blackrock's Ishares Bitcoin Trust saw a single-day inflow of $872 million, the largest since its launch this year. While BTC briefly dipped below $69,000 on Friday, QCP noted that interest remained, as open interest (OI) in BTC futures and options reached $40.65 billion and $25.3 billion, respectively—a 24.2% and 36.8% increase since early October.

Ahead of the U.S. election week, QCP's market strategists noted that bitcoin volatility is expected to spike.

The options market currently prices BTC's seven-day implied volatility at 74.4%, a sharp increase compared to the realized volatility of 41.4% last week. This gap suggests a significant risk premium tied to the election's uncertain outcome.

QCP also noted that while Trump currently has a slight edge in betting markets, both candidates' standing have been shifting, indicating a possible “sell-the-news” response after the election, similar to past market trends.

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