Bitcoin expected to face high volatility as ‘Trump trade’ and Q4 seasonality converge – Bitfinex

Bitcoin (BTC) is set for turbulent weeks ahead, with election uncertainty, the “Trump trade” narrative, and historically favorable fourth-quarter conditions creating a “perfect storm” for market movement, according to the latest “Bitfinex Alpha” report. 

The report said that in the lead-up to the US elections, Bitcoin has already demonstrated “whipsaw” price action following the 6% correction BTC underwent last week after approaching $70,000.

Notably, as the election date approaches, Bitfinex analysts expect volatility to intensify, particularly given the widely held view that a Republican victory may boost markets while a Democratic win presents more ambiguous implications.

Options markets are also affected

Option premiums and anticipated daily volatility for the US stock market and Bitcoin are projected to rise as election results are expected around Nov. 6 and Nov. 8. 

The report added that Bitcoin might experience even higher volatility as traders weigh potential market shifts tied to the election outcome, especially if former US president Donald Trump is election to office again due to his vocally supportive stance toward crypto.

Additionally, the implied volatility (IV) curve reflects heightened anticipation, with Bitcoin’s Nov. 8 strike prices suggesting IV levels above 100 for options with strike prices over $100,000.

High IV typically drives up option prices as sellers demand higher premiums to offset the risk of sharp price moves. The report suggested that this elevated cost reflects a cautious sentiment in the market, which is preparing for substantial price swings in the coming weeks. 

Options activity supports this sentiment. Over the past month, call options expiring in December with an $80,000 strike price have seen notable interest, hinting that market participants are positioning for potential price surges by year-end.

Q4 strength showing signs

Despite recent corrections, Bitcoin shows signs of its potential strength in the fourth quarter, a historically bullish quarter, particularly in halving years. BTC is currently up over 30% from September lows, marking a record-breaking 7.29% gain last month, a stark contrast to typical September challenges. 

Although pre-election jitters may temper October’s close, historical fourth-quarter gains, averaging 31.34%, remain a hopeful indicator of bullish momentum. Bitcoin has not posted a bearish fourth quarter in any halving year.

Additionally, the “Trump trade” effect plays a significant role in Bitcoin’s current performance, with macroeconomic factors and rising betting odds favoring Trump’s re-election feeding market uncertainty. 

The report cited recent data from RealClearPolitics and Polymarket, which places Trump’s victory probability at around 59% and 64.9%, respectively, fueling an already volatile market.

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