A Modern Election Cycle

Across asset groups the US Elections have historically created years of volatility within the financial markets. With each party promising different economic strategies, trading ideas are formulated to determine which investments will rise and fall based on the elected candidate.

Cryptocurrencies have been a spotlight of the US campaign. Trump has openly pitched himself as the pro-crypto candidate, vowing to make the United States “the crypto capital of the planet and the Bitcoin superpower of the world” during his appearance at the Bitcoin conference 2024 and separately is accepting cryptocurrency as a form of party donations. This differs from the increased regulations backed by the Democratic party. We have seen clear correlation between significant events unfolding in the 2024 presidential campaign, the changing probabilities within political betting markets and spot price in Bitcoin.

Polymarket is an on-chain prediction market providing a platform for users to trade probabilities on different subjects. The Presidential Election Winner 2024 prediction market offers a key insight into the probabilities of each candidate’s win in November and provides a reflection of real time sentiment. Similar to traditional betting sites, users are able to place “bets” on the probability of a binary outcome and trade the probabilities. The key difference between traditional betting sites and Polymarket is that the bets are placed in cryptocurrency, in this case USDC, and the debates are settled through smart contracts. Like off-chain betting markets, Polymarket uses a trading style format that allows users to buy and sell positions at prices which track probabilities.

Why does Polymarket work?

Prediction markets are a powerful tool and the “world's largest prediction market”, Polymarket, makes no secret of its goal: “Polymarket is the future of news.” A reflection of real life sentiment and an indicator of what the future holds. With growing wariness of mainstream media outlets and stories pushed by social media, it is easy to understand why people are turning towards decentralised sources of information to get a wider picture of real life events.

Explored below is the foreshadwoing of Biden dropping out, which could be noted in Polymarkets’ odds even before this was confirmed as fact through official channels. Traditional bettings sites use fixed odds, maintained by models and systems coded in the infrastructure. Betting exchanges take a different approach- decentralised pricing determined by user activity. What remains is the big question: Why does Polymarket work?

Prediction Markets

Markets can be centred on any event and a question is proposed with corresponding answers covering the scope of outcomes. The “rules” of a poll are outlined by the creator and will usually include a resolution date, a resolution source and any conditions which will be taken into account at poll settlement. An example is given below in Figure 1.