US Elections 2024: Brace for Impact

With the U.S. presidential election polls showing a tense race, cryptocurrency investors are bracing for volatility. But how important is the outcome of the election for the future of crypto in the medium to long run?

Looking at implied volatilities for BTC and ETH options, we can see a clear spike around the U.S. election date, which is not really surprising given that overall volatility is likely to increase around that date. Interestingly, BTC Put/Call Skew (the difference in price between a comparable call and put option) signals optimism across the curve. Even longer dated options with expiries beyond the election dates (>3 months) are showing a call premium over puts. This is rather surprising given the fact that the presidential race is on a knife’s edge, with the winner being anyone’s guess. It seems like the market is optimistic regardless of who wins the election.

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Source: Deribit, 15.10.2024

Source: Deribit, 15.10.2024

Until President Biden dropped out of the race in July, it seemed like Trump was the clear favorite within the crypto community. In the aftermath of the failed assassination attempt on July 12th, bitcoin jumped from $56,000 to $65,000, on the back of expectations that the former president would benefit from the incident. Trump’s view on crypto seems to have changed over the years. As president, he voiced skepticism over crypto, claiming that they could be used to facilitate illegal activities such as drug trafficking. He also mentioned at one point that he sees bitcoin as a currency competing against the dollar. In more recent times however, he wholeheartedly embraced crypto, pledging that he wants the U.S. to become a “bitcoin superpower” and the “crypto capital of the planet” under his leadership. His campaign has started accepting bitcoin donations. He also mentioned that he would replace SEC Commission Chair Gary Gensler, a notoriously disliked figure among crypto proponents. This pivot seems to have worked. Most of the crypto community is seemingly rallying behind Trump.

But Trump is not the only one who seems to have discovered the growing demographic of crypto constituents. While the Biden administration has taken a rather strict approach with regard to crypto legislation, Vice President Harris has signaled a more positive stance toward the technology, rebuffing allegations that she would seek a crackdown on the industry. Harris’ support comes amid increased pressure from special interest groups promoting crypto. By August, the crypto industry had already spent an unprecedented $119M on donations, according to research by the non-profit Public Citizen. According to the report, crypto corporations have contributed almost half (44%) of all corporate money in this year’s election.

So which candidate is better for crypto? Maybe the better question is: does it really matter? Although it seems common wisdom that a Trump presidency would be more favorable toward the industry, the options market paints a cautiously optimistic image despite the highly uncertain outcome of the election. With an estimated 40% of American adults owning crypto, it seems like neither candidate can ignore the demands for a regulatory level-playing field any longer. Now whether or not the candidates will actually act upon their electoral promises is obviously a whole different story. But the numbers and the public discourse show how far the industry has come in the past years, effectively evolving from a libertarian niche into a powerhouse with significant lobbying power and influence.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.