ANALYSIS: Prospects of a near-term recovery for the cottage coin are slim to none

On Nov. 4, Bitfinex reported that bitcoin nearly broke through its all-time high last week after eight months of oscillations, but then suffered a sharp pullback. We believe that the rally was initially driven by the 'Trump deal' narrative, and then dampened by uncertainty over the outcome of tomorrow's US presidential election. This lack of confidence is also reflected in the bitcoin options market.
As Election Day approaches, the market generally views a Republican victory as favorable for Bitcoin, while the prospects of a Democratic victory appear more ambiguous. The average odds of a Trump victory have dropped from 64.9% to 56%. In the options market, implied volatility for contracts nearing expiration is unusually low ahead of Election Day. This volatility lull suggests that investors are on the sidelines, waiting for clarity. However, a spike in volatility is expected between November 5 and 8, which could trigger a major swing in the market; a failure to do so could indicate a deeper level of caution in the market.
There has also been a lull in the cottage-coin market, where Bitcoin's market dominance has exceeded 60%, hitting a new cycle high. Whenever Bitcoin pulls back, the torrents face severe declines. Both Ether and SOL are down about 12% from their recent highs, while Ether is down 40% since the initial ETF rally. The speculative interest that once underpinned cottage coins appears to have disappeared, which is reflected in stabilized funding rates and overall low market sentiment. With Bitcoin absorbing most of the inflows into crypto assets, the cottage coins are struggling to keep up, and without a new catalyst, the prospects of them recovering in the near term appear slim.
Even in last week's pullback, Bitcoin's overall resilience since the September lows is noteworthy. All in all, the current market dynamics portend a very compelling week ahead. Whether you're a trader, investor, or casual observer, the road to Election Day is not destined to be uneventful.