Ethereum’s volatility has surpassed that of Bitcoin in recent months as traders prepare for the upcoming US election in November. The implied volatility for 30-day at-the-money Ethereum contracts relative to Bitcoin has widened, indicating increased uncertainty in the market. This heightened volatility is likely due to traders’ expectations for potential regulatory changes and the impact they may have on decentralized finance (DeFi) in the US.
As the second-largest cryptocurrency by market capitalization, Ethereum plays a crucial role in powering DeFi protocols and projects. Traders are anticipating significant movement in Ethereum’s price leading up to and during the election period, suggesting that it is more sensitive to external events compared to Bitcoin.
Despite this increased volatility, both Bitcoin and Ethereum currently exhibit a roughly neutral sentiment. However, Bitcoin is showing signs of mild bullish sentiment, possibly benefiting from positive seasonal performance typically seen in Q4 during bull cycles. Analysts predict that Bitcoin could potentially target $85,000 to $100,000 in Q4.
The US election introduces additional uncertainty as presidential candidates, such as Vice President Kamala Harris and former President Donald Trump, attempt to court industry participants in their favor. While Trump is viewed as more supportive of providing clarity and favorable policies for the crypto sector, Harris has also recently addressed the issue, although her future policy stance remains unclear.
Traders appear to have more confidence in Bitcoin’s ability to withstand these macro events, likely contributing to the divergence in volatility between Ethereum and Bitcoin. Overall, the upcoming US election is expected to have a significant impact on the cryptocurrency market, with traders closely monitoring developments and adjusting their strategies accordingly.