As the results of the US election draw near, hedge funds in Bitcoin [BTC] are showing a predominantly positive stance despite some level of caution prevailing in the market.
The previous week witnessed BTC flirting with its all-time high (ATH), surpassing $73K supported by a surge in demand for BTC ETFs and growing indications of a potential Trump victory.
However, the dynamics shifted during the election week. By November 3rd, Kamala Harris had significantly narrowed the odds against Trump on platforms like Polymarket, reaching almost a 50/50 mark on Kalshi, indicating a closely contested race where either candidate could emerge victorious.
Major Funds Targeting $70k-$85k range for BTC
Despite the tight contest, hedge funds predominantly held a bullish outlook, albeit with safeguards in place for both market directions. According to the latest data from Deribit, the options market saw substantial activity in purchasing call options (betting on price appreciation) within the $70K-$85K range for November. A portion of their update highlighted,
“A surge in option buying leading up to the Election. Large funds echoing CME’s purchases of November 70+80+85k call options along with November 74-85k Calls and November 70k Straddles.”
Moreover, the significant interest in straddles (wagers on substantial price fluctuations) indicated an anticipation of heightened volatility around the election day. Large funds strategically acquired both call options (protecting against price increases) and put options (guarding against price declines) to hedge against potential market swings in either direction.
Potential Delay in Election Outcome?
Interestingly, data from Deribit suggested a shift in traders’ focus from November 8th option expiries to November 29th. This pivot indicated an anticipated delay in the election results, possibly attributed to controversies or allegations of election interference.
“Although November 8th remains significant, heightened activity in November 29th options, likely due to a reduced rate of theta decay in the event of a delayed outcome, has taken precedence throughout the week.”
This short-term cautious approach likely triggered the recent risk reduction observed in the spot market towards the end of the previous week. BTC retreated from its recent peak of $73.6K to dip below $68K, with some analysts speculating a further decline, citing historical trends around election periods.
Crypto trader Eugene Ng Ah Sio acknowledged the trend, stating,
“Observing a systematic reduction in risk occurring at a critical juncture. The plot thickens…”
Eugene further advised refraining from active trading until the election results become clear.
Similarly, crypto trading firm QCP Capital cautioned that the election outcome might trigger a “sell-the-news” response regardless of the victor, drawing parallels to the reaction following the Nashville Bitcoin conference.
Market observer and investor Mike Alfred shared a comparable view, suggesting that the current week could represent the final opportunity to procure BTC below $70K.
“In past cycles, Bitcoin consistently reached a yearly low during the US election week, never to revisit that level again… This week appears to be the last chance to acquire Bitcoin below $70,000.”
Technically, the $65K mark holds significance as a crucial support level in case of a continued downturn.
Despite the prevailing uncertainty surrounding the election outcome, the collective positioning of major funds hints at a potential rebound for BTC in the near future.