This was a positive, if volatile, week for crypto heading into the final stretch of the U.S. 2024 elections. After approaching all-time highs, BTC sold off but has held the $70k level on the highest volumes seen in over three months. ETH continues to underperform BTC, with the ETH/BTC ratio touching 0.035, the lowest level since April 2021.
DOGE was the sole major asset to outperform BTC this week, perhaps due to the Elon Musk association amid election news flow. TIA dropped over 20% following a significant token unlock event. AVAX also notably lagged this week, possibly correcting after its strong 60-day performance.
With just a few days until November 5th, the U.S. 2024 elections of course dominate the discussion in many crypto investing circles.
As anticipated in our previous analyses, the correlation between crypto prices and election outcomes has strengthened as we approach election day.
The chart below compares 3-day changes in Polymarket's Republican win odds against BTC price movements. Election cycle phases are color-coded: gray for early stages (pre-June 26), red for initial Republican momentum (late June-July), blue for Democratic momentum following Harris's nomination, and black for the final three-month stretch.
The relationship between election win odds and crypto prices has fluctuated significantly, partly due to multiple non-electoral factors driving markets. The strongest correlations emerged during periods of Republican momentum—both in mid-July and in recent days.
Beyond the presidential race, crypto appears poised to gain influence in Congress. The Ohio Senate race commands particular industry attention, where incumbent Senate Banking Committee Chairman Sherrod Brown (D), a previous crypto critic, faces Bernie Moreno (R), who has backing from crypto super PAC Fairshake. Other notable races include Senate contests in Montana and Massachusetts, along with House races in California's 16th and Washington's 6th districts.
This aligns with our team’s recent client conversations. While investors generally expect positive outcomes regardless of which party wins the White House, some anticipate stronger gains under a Republican victory, citing more concrete pro-industry commitments. Additional volatility, however, could emerge if results are too close to call and it takes too much time to reach an outcome.
BTC and SOL stand out in conversations as potential outperformers. BTC, serving as crypto's proxy, could further benefit from ETF flows—2024's primary source of new capital. SOL's strong narrative positions it as a likely destination for profit diversification. ETH remains notably absent from most discussions.
Interestingly, the market continues to show the trend we have been highlighting of a large kink in implied volatilities around the election but a strong decrease afterward.
The chart below displays Deribit BTC options' implied volatility at constant maturity: 30-day (light blue), 60-day (dark blue), and 90-day (green). The gray areas highlight three 90-day periods leading up to key dates the market built expectations for: The spot BTC ETF launch on January 10, the halving on April 19, and the U.S. elections on November 5. The second chart below shows volatility risk premium—the spread between implied and realized volatilities—across 30, 60, and 90-day periods.
Contrary to the previous key events of 2024, ahead of which implied volatilities expanded by at least 25 IV points, implied volatilities ahead of the elections have been flat or down over the past couple of months.
This trend is also evident relative to realized volatility. The second chart, displaying the spread between implied and realized volatilities, further illustrates this point. Currently, the volatility risk premium (the difference between implied and realized volatilities) is roughly half of what it was before the BTC ETF launch and halving.
This does not mean that the market is expecting muted price action changes around the election, however. While election-day forward implied volatility remains high (nearly 80 IV points), consolidated implied vols are relatively low because longer-dated expiries show lower expectations for price action movements.
After six months of directionless trading, markets appear eager to move past election uncertainty toward firmer ground. Trading volumes, typically a reliable confirmation of crypto trends, are starting to show signs of life and have jumped 30-40% above their three-month average in the past couple of days.
The stage is set for crypto's next chapter. After months of choppy waters, all signals—from surging volumes to compressed volatility premiums—suggest we're approaching a decisive break. As election uncertainty clears and year-end positioning begins, the market appears coiled for action.
And if this all doesn’t look like enough action for you, don’t forget that next week is also FOMC week.
