Bitcoin's election bet

Traders are betting heavily on wild new upticks in bitcoin prices after next week's election.

Between the lines: Signs in the market indicate that folks trading on the future believe Republicans will have a strong showing in D.C.

Starting point: If you look at Deribit, the largest market for options in the crypto space, the two most popular call options for bitcoin are $80,000 and $100,000.

• That's a bet that BTC will be trading above that price.

Currently trading near $71,000, bitcoin has gained over 32% on its most recent run since Sept. 6.

• BTC is commonly viewed as a key chip in the so-called Trump Trade, which has fueled a rise in a number of assets expected to benefit if former President Trump wins back the White House.

What they're saying: "The Election Day option pricing is pricing in a 7% to 8% move," Ravi Doshi, FalconX's markets chief, tells Axios.

• Doshi said that all risk assets are acting like prices will go up. "It feels like all risk assets are pricing in a Trump victory," he says. "It feels like they are pricing in a sweep of Congress as well."

On top of that, long-term interest rates are rising, despite the fact that everyone expects the Fed to make another rate cut soon.

• More deficit spending points to higher long-term interest rates.
• "When there's not gridlock, that usually means you get more liquidity in the system at a faster pace," Doshi says.

The other side: With the likelihood that crypto's money will get many new allies elected to Congress, there's a chance the market could be pricing BTC to go up no matter who wins the White House.

• "I do think the difference is how quickly things turn around," Doshi says.

• Case in point: With Trump, instant change at the SEC is highly likely, for example. That's much less true if Vice President Harris is elected president.
• Notably, the most popular contracts for bitcoin call options expiring Nov. 8 — the first expiry after the election — are for $80,000 and $70,000, and it's very close.

What we're watching: There's $19.3 billion in open interest in bitcoin on Deribit now — the value of assets that could be sold if everyone exercised their options.

• In late October before the 2020 election, there was $2.5 billion.

The bottom line: "Bitcoin has become the tool for institutional investors looking to play the election," said Matt Hougan of Bitwise, an investment company for digital assets. "Bitcoin is arriving."