Investor risk appetite has significantly decreased, preparing for expected volatility.
Written by: BitpushNews
As the countdown to the U.S. election begins and the Federal Reserve's interest rate decision is about to be announced, investor 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 announcement at this week's Federal Reserve meeting, and Powell's post-meeting speech will also be a focus, as his remarks will directly impact market expectations for future monetary policy and may 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. As of the time of publication, the trading price was $67,807, down 1.44% in 24 hours.
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 is $2.21 trillion, with Bitcoin's market share at 59.41%.
U.S. stocks closed lower that day, with the S&P 500, Dow Jones, and Nasdaq indices falling by 0.27%, 0.60%, and 0.32%, respectively.
Moderate Optimism in the Bitcoin Options Market
In the options market, QCP Capital reported 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 noted that election day-related options also saw an increase, with implied volatility soaring.
Coinglass data shows that the current open contracts for BTC stand at 582,000, unchanged from the previous week and 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 moderate 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 a V-shaped Reversal After $66,000?
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 pointed out that during the recent bullish rebound, the Bitcoin market witnessed "sustained demand" around the $65,000-$66,000 range, pushing prices above $70,000 at the end of October.
Analysts stated that data from the Binance platform showed significant buying power in the $66,000-$67,000 range, pushing 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 stated: "On the eve of the election, the market believes that a Republican victory is 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 added: "Although there is a general expectation that volatility will increase before 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 of Bitcoin since the September low 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 said: "Bitcoin's price has recently surged, nearing its all-time high, which can be attributed to investor optimism about the election, as both 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 through 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 added: "A Harris victory may lead to a more moderate reaction, with Bitcoin prices stabilizing or experiencing more moderate 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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