Key Points
- As the US presidential election nears, Ether experiences a 7% bearish sentiment while Trump leads Harris by 12% in prediction markets.
- Ether’s bearish sentiment is expected to last longer than Bitcoin’s, which is set to turn positive after the election.
As the upcoming US presidential election on November 5 draws closer, there’s a significant divergence in sentiment towards two major cryptocurrencies, Ethereum (ETH) and Bitcoin (BTC). This shift seems to be influenced by the political landscape, with Republican Donald Trump extending his lead over Democrat Kamala Harris in prediction markets, affecting investor behavior towards these digital assets differently.
Ether is currently facing a notably more bearish sentiment compared to Bitcoin. This is evident from the most recent options market data from Amberdata and Deribit. Ether’s 25-delta risk reversals, which measure the premium of put options over call options, are deeper into negative territory than those for Bitcoin.
Election Volatility Influences ETH Risk Reversals
Options traders typically use risk reversals to gauge market sentiment and hedge their positions in the spot and futures markets. The more negative the risk reversal, the higher the premium that traders are willing to pay for downside protection versus upside potential. At present, Ether options set for expiration on October 11 show a risk reversal rate of -7.3%, with Bitcoin trading at -5.8%.
However, Ether is currently trading at $2,415, marking a 1.30% increase in the last 24 hours. The community sentiment indicator on CoinMarketCap shows 33% favoring the bullish sentiments while 67% vote for bearish sentiments for the cryptocurrency.
Interestingly, Bitcoin’s risk reversals turn positive for options expiring after November 8, signaling an expected volatility shift to the upside. On the other hand, Ether’s sentiment does not improve until late December, suggesting that traders are bracing for more immediate volatility in Bitcoin following the election results.
In September, trading activities on Derive, a leading decentralized exchange, revealed that Ethereum call options were being sold at a ratio of 2.5 to 1 compared to buys. This activity indicates a lack of confidence in Ether’s short-term price increase, as traders are more inclined to hedge against further price drops.
Nick Forster, founder of Derive, highlighted this cautious stance in his exclusive report, noting: “The skew in ETH open interest, with nearly 2.5 times more calls sold than bought, suggests that traders see the upside as limited for now. This divergence between the two assets will be key to watch as we get closer to election day.”
Politics and the Crypto Market
The intersection of politics and market sentiment is particularly pronounced in this election cycle. Trump’s odds of securing a victory have reached a two-month peak of 55.8% on Polymarket, significantly ahead of Harris at 43.8%. His campaign has intertwined with financial markets, notably through the September launch of the DeFi protocol World Liberty Financial.
While some financial analysts, like those from Standard Chartered, speculate that a Trump administration might favor Ethereum competitors like Solana, the broader sentiment is mixed. A Trump win is seen as potentially beneficial for cryptocurrencies in general, given his administration’s openness to integrating blockchain innovations into the financial ecosystem.
