The next few weeks will see bitcoin (BTC) experience significant volatility due to uncertainty surrounding the US presidential election, the "Trump trade" narrative, and the seasonal fourth quarter performance that the asset has experienced in previous years.
Analysts at crypto exchange Bitfinex stated in a weekly report that these factors will create a “storm” for BTC.
The US presidential election is increasingly influencing bitcoin price movements in the short term. The crypto community considers a Republican victory as a sign of a price surge for BTC, while a Democratic Party victory has the opposite effect. This is because the Republican candidate, Donald Trump, supports crypto and promises to provide friendlier policies for this growing industry if he becomes president.
On the other hand, the Democratic candidate, Kamala Harris, who is currently serving as Vice President in the current administration leaning towards anti-crypto actions, has only recently started to show a positive attitude towards digital assets as the election heats up.
The general market consensus is that option premiums and volatility for the US stock market and BTC are expected to increase by the first week of November after the election results are announced.
However, with the increasing correlation between the chances of a Trump victory and the increase in bitcoin prices, BTC is likely to experience higher volatility than other risky assets. This is the origin of the "Trump trade" narrative, which reflects the market's belief that the direction of bitcoin depends on the outcome of the election.
"Regardless of the election outcome, short-term volatility is expected to be higher than normal, although we remain bullish on long-term price increases," according to Bitfinex.
Bitcoin has started experiencing intense volatility. In the last week, the asset saw a sharp drop of 6.2% before recovering. On Tuesday, the cryptocurrency BTC had risen past $70,000 and reached $71,195 at the time of writing.
Meanwhile, BTC has shown remarkable resilience since its dip below $54,000 in early September. This asset is on track to close the month of October on a positive note, as in previous years.
