Bitcoin's Unconventional Relationship With the Dollar: A New Chapter as U.S. Election Nears
For years, Bitcoin (BTC) and the dollar index (DXY) have danced in a complicated tango, often moving in opposite directions. Traditionally, Bitcoin has shown a negative correlation with the DXY, meaning when one goes up, the other tends to go down. Yet, as the U.S. elections loom on the horizon, this longstanding relationship is facing a potential transformation, hinting at intriguing shifts ahead.
Currently, if we delve into the options pricing, we observe a shifting narrative. One-month 25-delta Bitcoin risk reversals - essentially the difference in premium between call and put options - sit at 1.20. This number reveals a bullish outlook for Bitcoin over the next month, based primarily on data from the Chicago Mercantile Exchange, a key player representing institutional interests.
Why does this matter now? The timing is significant. The upcoming U.S. Presidential Election is scheduled for early November, with crucial results expected shortly afterward. This period is crucial not just for traditional markets, but also for the ever-evolving crypto landscape, particularly Bitcoin.
In the world of options, a contingent stance emerges. Call buyers bet on the potential rise in Bitcoin, reflecting an optimism grounded in market expectations. Conversely, put buyers brace for potential downturns, protecting against possible dips. Insights from Deribit, a dominant crypto options exchange, highlight a trend: positive valuations for election contract expirations on November 8 and beyond illustrate a preference for calls, according to data managed by Amberdata.
Simultaneously, another layer of complexity is added by the global currencies. The 30-day risk reversals for the euro-dollar (EUR/USD), reflecting the market's most liquid pair, recently clocked in at -0.39 on the CME. This figure suggests apprehensions of the dollar holding its formidable position over the forthcoming month. Similar trends are visible in GBP/USD, reinforcing the expectation of sustained dollar strength.
All these elements indicate potential dollar index rallies, presenting a challenge to Bitcoin's climb. The dollar index, with the euro as its primary constituent, acts as a substantial factor in determining Bitcoin's trajectory.
However, Bitcoin is showing signs of resilience and independence. Recently, Bitcoin's market value surged close to a striking $68,000, the highest mark since late July, even as the dollar index held above the 103.00 mark, maintaining its steady position since its 3% climb commenced late September, as TradingView data suggests.
This optimism within options traders circles around reports of a pro-crypto sentiment gaining momentum. Notably, optimism stems from the belief that a Republican candidate, like Donald Trump, might be advantageous to Bitcoin. Traditional markets have viewed Trump's odds positively, potentially affecting Bitcoin's trajectory.
Jonathan de Wet, the Chief Investment Officer at Zerocap, a crypto liquidity provider, echoed these thoughts. He noted, "The potential upside linked to a Trump victory warrants consideration. Market participants are positioning ahead of time, and unless there emerges a destabilizing crisis, we foresee the BTCUSD approaching the $70,000 mark, with equities scaling new heights."
An intriguing trend in recent times among traders is the rush to secure call options at the $80,000 mark. Such a move underscores an appetite for upside exposure, highlighted by the popularity of the $100,000 call option, currently holding a staggering notional open interest exceeding $1 billion.
Furthermore, the U.S. election narrative has captured the crypto community's attention over the past half-year. As FRNT Financial expressed in a recent newsletter, "The U.S. election stands as a defining theme for crypto recently. Trump's engagement with the sector has been comprehensive, with clear policy suggestions. Conversely, what crypto policy might look like under Kamala Harris remains a mystery."
As the intersection of politics and finance continues to evolve, Bitcoin's relationship with the dollar is poised for potential redefinition. The upcoming weeks leading to the U.S. elections could usher in a new era for Bitcoin, challenging its traditional behavior and offering fascinating implications for investors and market watchers alike.
Closing with the thought that as the world watches the unfolding political drama, Bitcoin enthusiasts and analysts will remain on high alert, looking to capitalize on the shifts in this uncharted territory. The trajectory and correlation between Bitcoin and the dollar index will continue to be a focal point of analysis, as every movement signals a new development in this ongoing financial saga.
Currently, if we delve into the options pricing, we observe a shifting narrative. One-month 25-delta Bitcoin risk reversals - essentially the difference in premium between call and put options - sit at 1.20. This number reveals a bullish outlook for Bitcoin over the next month, based primarily on data from the Chicago Mercantile Exchange, a key player representing institutional interests.
Why does this matter now? The timing is significant. The upcoming U.S. Presidential Election is scheduled for early November, with crucial results expected shortly afterward. This period is crucial not just for traditional markets, but also for the ever-evolving crypto landscape, particularly Bitcoin.
In the world of options, a contingent stance emerges. Call buyers bet on the potential rise in Bitcoin, reflecting an optimism grounded in market expectations. Conversely, put buyers brace for potential downturns, protecting against possible dips. Insights from Deribit, a dominant crypto options exchange, highlight a trend: positive valuations for election contract expirations on November 8 and beyond illustrate a preference for calls, according to data managed by Amberdata.
Simultaneously, another layer of complexity is added by the global currencies. The 30-day risk reversals for the euro-dollar (EUR/USD), reflecting the market's most liquid pair, recently clocked in at -0.39 on the CME. This figure suggests apprehensions of the dollar holding its formidable position over the forthcoming month. Similar trends are visible in GBP/USD, reinforcing the expectation of sustained dollar strength.
All these elements indicate potential dollar index rallies, presenting a challenge to Bitcoin's climb. The dollar index, with the euro as its primary constituent, acts as a substantial factor in determining Bitcoin's trajectory.
However, Bitcoin is showing signs of resilience and independence. Recently, Bitcoin's market value surged close to a striking $68,000, the highest mark since late July, even as the dollar index held above the 103.00 mark, maintaining its steady position since its 3% climb commenced late September, as TradingView data suggests.
This optimism within options traders circles around reports of a pro-crypto sentiment gaining momentum. Notably, optimism stems from the belief that a Republican candidate, like Donald Trump, might be advantageous to Bitcoin. Traditional markets have viewed Trump's odds positively, potentially affecting Bitcoin's trajectory.
Jonathan de Wet, the Chief Investment Officer at Zerocap, a crypto liquidity provider, echoed these thoughts. He noted, "The potential upside linked to a Trump victory warrants consideration. Market participants are positioning ahead of time, and unless there emerges a destabilizing crisis, we foresee the BTCUSD approaching the $70,000 mark, with equities scaling new heights."
An intriguing trend in recent times among traders is the rush to secure call options at the $80,000 mark. Such a move underscores an appetite for upside exposure, highlighted by the popularity of the $100,000 call option, currently holding a staggering notional open interest exceeding $1 billion.
Furthermore, the U.S. election narrative has captured the crypto community's attention over the past half-year. As FRNT Financial expressed in a recent newsletter, "The U.S. election stands as a defining theme for crypto recently. Trump's engagement with the sector has been comprehensive, with clear policy suggestions. Conversely, what crypto policy might look like under Kamala Harris remains a mystery."
As the intersection of politics and finance continues to evolve, Bitcoin's relationship with the dollar is poised for potential redefinition. The upcoming weeks leading to the U.S. elections could usher in a new era for Bitcoin, challenging its traditional behavior and offering fascinating implications for investors and market watchers alike.
Closing with the thought that as the world watches the unfolding political drama, Bitcoin enthusiasts and analysts will remain on high alert, looking to capitalize on the shifts in this uncharted territory. The trajectory and correlation between Bitcoin and the dollar index will continue to be a focal point of analysis, as every movement signals a new development in this ongoing financial saga.
Last edited at：2024/12/16
#BTC#U.S. Dollar Index#Donald J. Trump