As the countdown to the U.S. election begins and the Federal Reserve's interest rate decision is set to be announced this week, investors' risk appetite has significantly decreased, preparing for expected volatility.

Data shows that the Deribit Bitcoin Volatility Index has reached its highest level since the end of July. Similarly, the MOVE Index, which tracks implied volatility of U.S. Treasuries, rose to its highest level since October 2023 last Friday.

Fed Watch data indicates that traders expect a 98% chance of an interest rate cut being announced at this week's Federal Reserve meeting. Following the meeting, Powell's speech will also be a focal point, as his remarks will directly influence market expectations for future monetary policy and could trigger market fluctuations.

According to Bitpush data, Bitcoin hovered above $68,500 in the morning but faced downward pressure in the afternoon, hitting an intraday low of $66,803. The trading price at the time of writing is $67,807, reflecting a 24-hour decline of 1.44%.

The altcoin market saw more declines than gains, with THOREChain (RUNE) down 16%, Popcat (POPCAT) down 12.6%, and Ponke (PONKE) down 12.3%.

The overall cryptocurrency market capitalization currently stands at $2.21 trillion, with Bitcoin's market share at 59.41%.

U.S. stocks closed lower, with the S&P 500, Dow Jones, and Nasdaq indices falling by 0.27%, 0.60%, and 0.32%, respectively.

Bitcoin Options Market Shows Mild Optimism

In the options market, QCP Capital reports an increase in the purchase of $75,000 call options expiring at the end of November, reflecting a growing demand for upside risk exposure. Analysts note that election day-related options have also risen, with implied volatility surging.

Coinglass data shows that the current open contracts for BTC stand at 582,000, unchanged from the previous week but up 10% from a month ago. This indicates that despite recent uncertainties and price corrections, investors are still increasing leveraged positions. Combined with the long and short data from top traders, this suggests a mild bullish sentiment remains even after Bitcoin surged above $73,500 on October 29, indicating that professional investors are optimistic about Bitcoin's long-term prospects and are actively positioning themselves.

Testing $66,000 for a V-shaped Reversal?

Chart analysts believe that Bitcoin has broken below the $68,500 level on the daily chart, with the next area of interest being around $65,000-$66,000.

On-chain analyst Skew points out that during the recent bullish rebound, the Bitcoin market witnessed "sustained demand" around the $65,000-$66,000 range, which pushed prices above $70,000 at the end of October.

Analysts state that data from the Binance platform shows significant buying power in the $66,000-$67,000 range, which helped push Bitcoin prices above $69,000. The high liquidity in this range indicates that market participants have strong support and resistance expectations at this price level, suggesting that future price movements may fluctuate around this range.

As shown in the chart below, the $66,000-$67,000 range acted as a key resistance level several times before being broken, so after the U.S. election results are announced, this critical area may support a V-shaped reversal for Bitcoin.

Bitfinex analysts state: "On the eve of the election, the market believes that a Republican victory would be favorable for BTC, while a Democratic victory makes the outlook more ambiguous. The average betting odds for a Trump victory have dropped from 64.9% to 56%."

They add: "Although there is a general expectation that volatility will increase ahead of the November 5 U.S. election, many market participants seem reluctant to take action and are adopting a wait-and-see attitude. Even with last week's pullback, the overall rebound in Bitcoin since the September lows remains noteworthy. In short, the current market dynamics suggest that the upcoming week will be exciting. Whether you are a trader, investor, or casual observer, the road to election day will not be uneventful for the cryptocurrency market."

Swan Bitcoin CEO Kippsten also anticipates a surge in volatility. He states: "Bitcoin's price has recently surged, nearing its all-time high, which can be attributed to investor optimism regarding the election, as both parties' campaign teams are actively engaged, and significant funds are flowing into Bitcoin ETFs. A Trump victory could lead to a short-term spike in Bitcoin prices, potentially breaking the $80,000 or $90,000 mark, especially if Trump fulfills his Bitcoin promises, which would help accelerate adoption by individuals, businesses, and even nation-states."

He adds: "A Harris victory may lead to a more moderate reaction, with Bitcoin prices stabilizing or experiencing more modest increases in the short term. The Harris administration still holds a positive attitude towards Bitcoin and may establish a friendlier environment with greater legal and regulatory transparency."

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