As the US election outcome draws near, hedge funds’ stance on Bitcoin [BTC] appears to lean towards optimism, despite maintaining an air of caution.
Recently, BTC flirted with its all-time high (ATH) by surpassing the $73K mark due to a surge in BTC ETF demand and the increasing likelihood of Trump’s victory.
The landscape shifted during the election week. By November 3rd, Kamala Harris had closed the gap on Trump’s odds on Polymarket, reaching near-even odds on Kalshi, creating a closely contested race where either candidate could emerge victorious.
Institutional Players Target BTC Ranges of $70k-$85k
Despite the tense electoral climate, hedge funds displayed a predominantly bullish stance, hedging their positions on both sides of the market as a precautionary measure.
Recent data from Deribit highlighted a significant uptick in call options (betting on price increases) within the $70K-$85K bracket for November. A segment of the report mentioned,
“Overwhelming buying activities in the options market ahead of the Election. Major fund participation resembles activity in CME’s November 70+80+85k Call options alongside November 74-85k Calls and November 70k Straddles.”
Furthermore, the substantial interest in straddles (bets on significant price fluctuations) signals an anticipation of heightened volatility surrounding the election date. Large funds strategically acquired both call options (for upside protection) and put options (for downside protection) to mitigate potential price swings in either direction.
Potential Delay in Election Results?
The most significant observation from the Deribit data pertained to traders shifting their focus from November 8th option expiries to November 29th. This shift indicated an anticipated delay in declaring the election outcome, possibly due to controversies or allegations of election tampering.
“While November 8 continues to garner attention, larger interests are observed in November 29, possibly in anticipation of constrained theta decay in the event of a prolonged conclusion, dominating activities throughout the week.”
This cautious near-term approach likely contributed to the recent de-risking observed in the spot market towards the week’s end.
Bitcoin slid from its recent peak of $73.6K to below $68K, with some analysts foreseeing further declines, citing historical trends around election periods.
Eugene Ng Ah Sio, a crypto trader and analyst, noted,
“An evident de-risking trend emerging right on schedule. The plot thickens…”
Eugene expressed intentions to avoid market participation until the election results surface.
QCP Capital, a crypto trading firm, also adopted a cautious tone, warning that the election’s outcome might trigger a “sell-the-news” response. The firm stated,
“Irrespective of the result, we anticipate a sell-the-news scenario post the Elections, mirroring reactions seen after the Nashville Bitcoin conference.”
Market observer and investor Mike Alfred echoed similar sentiments but highlighted that the current period might represent the final opportunity to acquire Bitcoin under $70K.
“Historically, Bitcoin has established a lower price point in the week of the US election, which has never been revisited thereafter… This week might mark the final chance to purchase Bitcoin below $70,000.”
On the price charts, the $65K mark retained importance as a critical level should the pullback persist.
Notwithstanding the uncertainties surrounding the election outcome, the positioning of major funds hints at the potential recovery of Bitcoin.