ZB Academy：Bitcoin implied volatility rises with U.S. election
CNN couldn’t wait to change the title “Voting Day in the United States” on the homepage early on the 3rd. At the same time, the report wrote that “100 million voters have voted and more than 9.3 million people have been infected with the new crown pneumonia. Tuesday is the last opportunity for Americans to judge Trump’s presidency.”Experts estimate that the voter turnout in the US presidential election will be as high as 65%, the highest since 1908.
Bitcoin reached the highest price of the most recent year a month ago and finally broke through the price resistance level of $12,000. Since then, prices have been on a slow upward trend, with monthly volatility increasing from 33% to 43%-the three-month low observed at the end of July.
The steady growth of Bitcoin occurred during the global Covid-19 crisis, partly because more institutional investors entered the crypto market. However, this also brings new risks. 2020 is the year when Bitcoin and the S&P 500 index reach the highest correlation. On Wednesday, the correlation between Bitcoin and the S&P 500 index for a month was only 7%. However, the annual correlation has remained at an intermediate level of 45%. As the outlook for the fourth quarter of the world is still inconclusive in the near future, the market correction or accelerated recovery may once again test the argument for the hedging of crypto assets.
When there is a major unexpected price drop in the stock market, investors often close out the best performing assets to make up for the losses of other assets. Bitcoin’s performance this year has been better than most assets, so in the case of another decline in the market, Bitcoin may be affected similar to March. Therefore, the fall in the stock market may trigger the flight of Bitcoin’s profit. This indicates that there is a greater opportunity when the correlation between cryptocurrency volatility and the stock market is low.
According to Skew’s data, Bitcoin’s monthly implied volatility (investors’ expectations of how the price will fluctuate in the next four weeks) has risen to a two-week high of 59% in the past three days. As the decisive battle day of the US election draws closer, the price of Bitcoin will remain sensitive to the outcome of the US election. Therefore, market analysts at ZB.com expect Bitcoin to fluctuate in the next few days. They also stated that the increased expectations of short-term price fluctuations may be related to concerns that the election results may be controversial, leading to a period of political and economic uncertainty.
Although the one-month implied volatility has rebounded, the six-month implied volatility has remained above 60%. This shows that the market does not expect the political uncertainty of the world’s largest economy to continue for a long time.
If the outcome of the US election is controversial, the traditional market may be affected, exacerbating Bitcoin’s ongoing correction. Once the dust settles after the election, as investors seek returns, the increasing number of negative-yielding bonds around the world may reignite the Bitcoin bull market. According to ZB.com’s official market data, Bitcoin’s current trading price has basically remained unchanged. It is now quoted at $13,800, with a 24-hour maximum price of $14,055, a 24-hour increase of 1.27%.
About ZB Group
ZB Group was founded in 2012 with the goal of providing leadership to the blockchain development space and today manages a network that includes digital assets exchanges, wallets, capital ventures, research institutes, and media. The Group’s flagship platform is ZB.com, the industry leading digital asset exchange. The platform launched in early 2013 and boasts one of the world’s largest trading communities.
ZB Group also includes ZBG the innovative crypto trading platform, and BW.com, the world’s first mining-pool based exchange. Other holdings include wallet leader BitBank, as well as exchange brands ZBM, ZBX and Korea’s Bithi.
Industry intelligence and standards are headed by the recently launched ZB Nexus who embody the core values of ZB Group and open-source their reports and analysis for the public.
Learn more about ZB Group by visiting www.zb.com.