Election Day Insights on Crypto Trading

Election Day in the United States has arrived, and the 24/7 nature of cryptocurrency trading provides a distinct advantage over traditional market trading hours. Analysts at Kaiko have identified three key metrics to track as election results unfold.

1. Tick Trade Data

Monitoring tick trade data on major platforms can provide insights into the actions of "smart money." Cumulative Volume Delta (CVD) is a method that measures net buying and selling activity on crypto trading platforms globally. It proved useful during the presidential debate between Donald Trump and Kamala Harris, where a negative CVD indicated a bearish reaction to Trump’s comparative performance.

By differentiating between buys and sells, observers can identify selling pressure in real time, thus aiding market timing decisions.

2. Funding Rates

Kaiko suggests keeping an eye on funding rates, especially since leveraged traders are sensitive to sudden shifts that can lead to liquidations. Elevated funding rates often indicate speculation in Bitcoin perpetual contracts. For example, funding rates rose above 0.05% in March when Bitcoin hit a record high, but last week they steadied around 0.01%, revealing reduced trader confidence before the election.

Funding rates will adjust every eight hours on Binance, starting from 12 p.m. ET and again at 8 p.m. after East Coast voting ends.

3. Implied Volatility (IV)

Implied Volatility, which reflects how traders price risk, is another crucial metric. It consolidates various data points into a single figure, helping traders identify if options are cheap or costly. Monitoring IV term structure can help anticipate potential market risks, particularly with an inverted structure indicating an impending risk event, such as the election.

Traders adjust positions in response to volatility, reflecting their views on potential price swings.

Prediction Markets and Polling Divergence

Trump currently leads in odds on the prediction markets, with a 62%-38% lead on Polymarket and a 57%-43% advantage on Kalshi, despite national polls showing a tight race with a 1% lead for Harris.

Kaiko previously pointed out the liquidity issues with Polymarket and the potential biases affecting its predictive capabilities. However, Bernstein analysts contend that market behavior reflects public sentiment and acknowledges temporary discrepancies.

Key swing states to watch include Pennsylvania, North Carolina, Georgia, Michigan, Wisconsin, Arizona, and Nevada. Trump leads in several of these, while Harris holds a lead in Michigan and Wisconsin.

Anticipated Price Impact on Bitcoin

Experts expect significant price fluctuations for Bitcoin post-election, predicting a possible $6,000 to $8,000 swing. A Trump win could send Bitcoin to all-time highs above $75,000, while a Harris victory might lead to a dip towards the $60,000 range. Despite potential volatility, analysts maintain a favorable medium to long-term outlook for Bitcoin.

Currently, Bitcoin trades at $68,828, down 4% over the week but up 63% year-to-date. The GMCI 30 index, which tracks the top 30 cryptocurrencies, is down approximately 7% in the last seven days but has gained around 21% in 2024.