QCP Capital: It is estimated that the fluctuation of Bitcoin on election night will be about 3.5%, and the market may have underestimated the risks after the election

QCP Capital stated that in the stock market, bond market and cryptocurrency market, as one of the most contentious presidential elections in US history is about to kick off, the anxiety in the market is becoming more apparent. The "Trump Trade" (i.e., betting on a stronger dollar, rising cryptocurrencies and higher treasury yields) has been heating up on the eve of the election due to Trump's leading position in prediction markets.

However, if Harris ultimately wins, these gains could be quickly wiped out causing severe fluctuations overnight. Currently, it is expected that Bitcoin spot price will fluctuate by around 3.5% on election night. But traders may have underestimated post-election risks: lack of volatility premium after November 8th suggests that markets expect quick election results but might underestimate potential delays or controversial outcomes.

The congressional election results are equally important and could potentially have an equal impact as presidential elections. If Republicans win big time it could mean higher future fiscal deficits prompting Federal Reserve to adopt a more hawkish stance - undoubtedly unfavorable for risk assets. Conversely if there's legislative split then markets might stabilize with gradually decreasing volatility.

Currently options market shows balance between call options and put options with significant buying activity seen for both upside calls and downside puts over past few days. However Bitcoin still remains part of "Trump Trade". On Monday with large fund outflows from spot ETFs Bitcoin spot prices fell which aligns with poll showing Harris having slight lead in Iowa state. As tomorrow's election results roll out Bitcoin spot prices are expected to see severe fluctuations.