The Week Onchain》Week 45: Elections ignite BTC! Fluctuation expected to rise again!

Editor's note:

This report is translated from glassnode's "Bitcoin Breaks To New ATHs". The article analyzes the reasons behind BTC's new historical highs in the atmosphere of the US presidential election and the market trends behind it. With the increasing possibility of Trump's victory, the BTC price broke 76,800 and entered a price discovery phase, showing stable rise in capital inflows. The article also pointed out that recent profit-taking activities have increased, but the realized losses remain depressed, indicating overall market optimism. In addition, the outstanding contracts and implied fluctuation in the options market have significantly increased, indicating that investors are actively hedging market fluctuation risks. For readers who wish to deepen their understanding of the BTC market structure, capital flows, and the impact of options on market fluctuation, this article will provide you with rich insights and key data to help you grasp the pulse of the current market and possible future trends.

Key Points Summary

BTC breaks through a new all-time high of 75,400, as the likelihood of President Trump winning the US election has significantly increased.

The capital inflow of BTC assets continues to rise, indicating a stable influx of new demand.

Profit-taking activities have increased significantly, but the realized losses remain minimal. However, these figures are relatively mild compared to the volume during extreme market conditions.

The options market prices in higher volatility expectations due to investors hedging their positions in various directions.

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New historical high

After months of consolidation and Sideways oscillation, BTC broke through new historical highs due to the high probability of President Trump's victory. The price successfully broke through the 73,700 level and rose to over 75,300, entering the price discovery phase, driving investors' sentiment closer to frenzy.

Image source: glassnode real-time chart - BTC: price OHLC [USD]

Liquidityrise and increased profits

Since early September, there has been a significant increase in the net capital inflow of BTC, indicating a rise in investors' demand for capital allocation, and traders have also taken profits in the strong market trend.

The realized market capitalization of BTC has risen by 3.8% in the past 30 days, reaching one of the highest inflow levels since January 2023. The current realized market capitalization has reached a record high of 6,560 billion, supported by a net capital inflow of 25 billion within 30 days.

Source: glassnode real-time chart-BTC: Changes in realized Market Cap relative net position

The highest realized profit volume reached 3.1 billion at the time of the historical high in March. As the market has absorbed this change over the past seven months, the realized profit and loss volume has returned to a balanced state, indicating that the supply and demand forces have been completely reset.

At the same time, we can see the structural rise of profit-taking reappearing, implying a new wave of demand entering the market.

Source: glassnode real-time chart - BTC: Net realized PNL (physical adjustment)

We can also observe the changes in market dynamics by the ratio between profit and loss volume.

Currently, the market is in a profit-driven state, with the amount of profit realized about 47 times larger than the amount of loss. This reflects that as the market reaches new historical highs, the supply of holdings with losses becomes increasingly scarce.

Source: glassnode Real-Time Chart - BTC: Realized Profit/Loss Ratio (Adjusted for Entity)

We also observed a significant increase in the volume of profit-taking, with an average daily increase of 6.35 billion.

Although this is a relatively large dollar value compared to the previous Bull Market peak frenzy, it is still relatively moderate.

Source: glassnode real-time chart-BTC: realized PNL [USD]

ETF fund outflow

This month, the US BTC ETF has shown astonishing demand, recording a wave of capital inflows comparable to when the product was first launched.

However, on the eve of the U.S. presidential election, investors seem to have already mitigated risks, with significant capital outflows in the past 3 days. However, with the formation of new historical highs, ETF may usher in new demand and attract trend-chasing investors.

Image source: glassnode real-time chart - BTC: US Spot ETF net flow [BTC]

Increased volatility expectations

The U.S. presidential election has become the focus of attention for investors, and the increased volatility in recent weeks has already been reflected in prices. Since 2023, the options market has become an important part of the Bitcoin market structure, allowing investors to express their views on the market more flexibly.

The total amount of unclosed positions in options contracts has soared to 25.2 billion, second only to the historical high of 30.2 billion in March.

Source: glassnode real-time chart-BTC: Options UnClosed Position contracts [USD]- All exchanges

Option volume is also increasing, currently reaching 2.9 billion, second only to the historical high in March and the volume during the yen arbitrage closing period on August 5th. This further indicates an increase in institutional investors and the use of sophisticated tools to express their market views.

Image source: glassnode real-time chart-BTC: Options volume [USD]- All exchange

By evaluating the ratio of the remaining Close Position quantity allocated to put and call contracts, we can see that the remaining Close Position contracts of both parties are almost equal. This indicates that investors and speculators have hedged and placed bets on both market directions.

Source: glassnode real-time chart-BTC: Option Close Position Ratio - All exchange

The view that investors expect future volatility to rise can also be seen from the pricing of implied volatility (IV) of options.

Currently, we see a surge in implied volatility for all contract expiration dates, especially short-term 1-week expiration contracts, indicating that investors are predicting and betting on higher volatility levels before and after the announcement of the U.S. election results.

Image source: glassnode real-time chart - BTC: Option implied Volatility (at-the-money) - Deribit

By comparing the difference between the implied volatility and the realized volatility of the same-term options, we can calculate the volatility risk premium (VRP). This indicator represents the compensation that option writers require for assuming volatility risk.

Currently, the 1-month VRP is 27.9%, with only 1.4% of trading days recording higher values. This highlights the extreme volatility characteristics in the options market.

Image source: glassnode real-time chart-BTC: volatility risk premium (VRP)

By evaluating the distribution of put and call options expiring on November 6 (just after the US election day), we can see that the outstanding contracts for Close Position on both sides are almost equal. The total amount of outstanding contracts for put options is 1,348 BTC, while the outstanding position of call options is 1,271 BTC.

This indicates that investors have hedged against downside protection and upside exposure, highlighting the uncertainty of the final market direction.

Image Source: glassnode Real-time Chart-BTC: Options on UnClosed Contracts Classified by Exercise Price [BTC] - Deribit

Summary and Conclusion

After the U.S. presidential election, Bitcoin reached a new historical high, trading above 75,000 for the first time this week. This rise is supported by a moderate capital inflow of 25 billion per month, indicating a stable influx of new demand, which may bring further potential for rise.

With the increase in demand and the expected expansion of the Fluctuation of options tools, the market seems ready to embrace further Fluctuation.

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[Disclaimer] The market is risky, and investment should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, viewpoints, or conclusions in this article are applicable to their specific circumstances. Investing based on this is at your own risk.