Written by: Chandler, Foresight News
On November 5, the 2024 U.S. presidential election will conclude, and the competition between Kamala Harris and Donald Trump remains intense, with the election situation continuing to be deadlocked.
Based on past experiences, polls have indicative significance for the election. The U.S. political prediction website RealClearPolitics (RCP) shows that if voting were to occur based on the current state polling scenarios, Trump and Harris have locked in 219 and 215 electoral votes for their respective camps.
According to the average of public opinion polls, Trump's approval rating has surpassed Harris's by 0.4 percentage points.
Additionally, on the Polygon-based prediction market Polymarket, the probability of Trump winning has risen to 67%, while the probability of Harris winning has fallen to 33.1%, giving Trump a lead of 33.9 percentage points. According to Lookonchain monitoring, in October, 10 whale addresses spent a total of $70.6 million on Polymarket betting on Trump to win the U.S. election.
However, the existing odds on Polymarket do not fully reflect the true sentiments of American voters.
According to Bloomberg, Polymarket confirmed that the large buyer betting on Trump's victory, FREDI9999, is a French trader. As of October 24, four accounts named FREDI9999, Theo4, PrincessCaro, and Michie have placed heavy bets on Trump's victory, with a potential total payout of about $46 million.
Polymarket stated that the company conducted an investigation and concluded that the trader was betting based on 'personal views on the election' and found no information suggesting that the user manipulated or attempted to manipulate the market.
In addition, (Fortune) magazine recently reported that analysts from blockchain companies Chaos Labs and Inca Digital found rampant wash trading on Polymarket, discovering signs of fake trading activity, where buying and selling often occur simultaneously and repeatedly to create the illusion of trading volume and activity. Chaos Labs found that fake trades account for about one-third of the trading volume in the U.S. presidential election market on Polymarket, while Inca Digital found that a 'large portion of the trading volume' may be attributed to potential fake trading.
Inca stated that the actual trading volume in the presidential election prediction market is approximately $1.75 billion, while Polymarket reported a figure of $2.7 billion. Chaos Labs attributed this to Polymarket confusing trading stocks with dollars.
It is also noteworthy that in the U.S. presidential election, the Electoral College system means that national popular vote support does not determine the final outcome; polling in key swing states is crucial to the election's direction. Even if a candidate receives more votes nationwide, if they fail to win the electoral votes of key states, they could still lose the election. Therefore, voter intentions in swing states are more critical than national polling, as these states often play a decisive role in the election results.
How traditional financial markets view the election
On October 29, the NASDAQ Composite Index rose by 0.78%, closing at 18712.75, setting a new historical high. On October 30, the three major U.S. stock indexes slightly declined, with the NASDAQ ending a four-day winning streak, down 0.56%. From the perspective of on-site traders and investor sentiment, as the U.S. presidential election is only a week away, the market is preparing for the possibility of Trump returning to the White House. Phillip Wool, portfolio management head at Rayliant Global Advisors, stated that the odds of Trump winning the presidential election are increasing, which is favorable for the U.S. stock market in the short term. He pointed out that the fiscal deficit will increase and inflation will rise, which could slow the Fed's rate cuts. All of this will create upward pressure on the dollar.
Meanwhile, the latest valuation of Truth Social, Trump's social media platform, has surpassed that of Musk's social media platform, X. As of the close on October 29, the stock price of Truth Social's parent company, Trump Media Technology Group, has surged 324% from its recent low on September 24, with a market value rising to $10.3 billion. However, it also saw a pullback on the 30th, with the market value returning to around $8 billion.
The yield on the 10-year U.S. Treasury bond rose to 4.34% earlier on the 29th, the highest level since early July, closing at 4.28% on the 30th. The current price of London gold is $2,798 per ounce, again setting a new historical high.
After Bitcoin surged to $73,600 (the highest point since March), it slightly retreated, currently trading around $72,500, close to its historical high.
However, on another level, the election situation is far from certain. According to analysis by Shenwan Hongyuan, in the short term, if Trump is elected, the continuity of early trading may be relatively limited, but if Harris wins, early trading may undergo a significant reversal. Historically, the betting market predictions of election results have not been reliable, with 5 out of 22 elections since 1936 failing to predict correctly; polls also have their shortcomings.
This year, the continuation of mail-in ballots, urban-rural population migration after the pandemic, and new biases in polling models adjusted for Trump could bring uncertainty to the results, but market trading has clearly tilted towards Trump. This means that if Trump wins smoothly, market trends may resemble those of 2020 or 2012, with slight continuation of early trading; however, if Harris wins, the market may experience a significant reversal similar to 2016.
Crypto market: High open interest awaits a breakout
Currently, the open interest in the crypto market has significantly increased, especially in the Bitcoin options and futures sectors, reflecting investors' strong expectations for the upcoming U.S. election and subsequent market volatility. Deribit CEO Luuk Strijers noted that derivatives traders are preparing for a bullish trend in Bitcoin in the days following the November 5 U.S. election.
Strijers stated: 'For options expiring on November 8, the open interest value exceeds $2 billion, with the main strike prices at $70,000, $75,000, and $80,000, and the put/call ratio is 0.55, indicating that the number of open call options is twice that of put options. Compared to Mark IV, Forward IV has shown a significant increase, especially during election week, indicating that traders expect higher volatility. The forward implied volatility is 72.29%, suggesting potential price fluctuations of about 3.78% in the days following the presidential election.'
The open interest in Bitcoin options has risen to a nearly six-month high.
Data source: Coinglass
Strijers added that the peak in implied volatility is temporary, indicating that the market does not expect long-term uncertainty. The 25 Delta Skew (put options - call options) is entirely negative, indicating that the market expects a greater upward trend, with bullish sentiment strengthening. There is strong demand for call options relative to put options, and investors are less concerned about managing downside risk.
From the data of Bitcoin spot ETFs, on October 29, the total net inflow was $870 million, making it the third highest single-day net inflow in history. The highest secondary net inflow was $1.05 billion on March 12, and the second highest was $887 million on June 4.
As of the time of publication, the total net asset value of Bitcoin spot ETFs is $72.545 billion, with an ETF net asset ratio (market value as a percentage of Bitcoin's total market value) reaching 5.07%, surpassing 5% for the first time in history.
On October 29, Bitcoin spot ETFs saw the third highest single-day net inflow in history.
Data source: SoSoValue
In addition, the open interest in Bitcoin futures set a new high in dollars on the 29th. The OI for BTC futures recorded the largest single-day increase since June 3, with an increase of over 20,000 BTC in one day.
Daily changes in open futures contracts
Data source: Glassnode
Open Interest (OI) refers to the total number of derivative contracts (such as futures or options) that have not been settled within a specific timeframe. A higher number of open contracts typically indicates greater market interest in that specific asset. When the number of open contracts increases as prices rise, it signifies new funds flowing into the market, usually seen as a signal of trend strength. This has been observed in recent trading days.
As of the time of publication, the total open interest in Bitcoin has reached $43.468 billion. In the past two days, CME's open interest has exceeded 170,000 BTC, worth over $12.549 billion, giving it about 30% dominance in the futures market. Binance's Bitcoin futures have also exceeded 127,100 BTC in open interest, worth over $92 million, accounting for more than 20% of the market.
CME BTC contract open interest is nearing historical highs
Data source: Coinglass
Overall, both the traditional market and the crypto market currently show a certain degree of optimism, and some traders seem to be positioning themselves again for 'Trump trades'. In the short term, the political uncertainty during the election often brings significant price volatility in the short term. These fluctuations arise not only from voters' changing expectations of candidates' policies but are also driven by market reactions to economic fundamentals. However, in the long run, asset pricing still mainly depends on fundamental factors, and the impact of the election on the market is typically realized through changes in fundamentals.
