Markets are telling us something about the US election — Week in Review

A widely circulated sentiment for the past week on CT and Fintwit is that markets are positioning for a Trump victory, a topic we covered on this week's episode of Token Narratives.

I first saw it talked about by the Mad King on Monday, followed by many CT accounts throughout the week, and capped off at the end of the week by none other than Drukenmiller, who said, "the market, and the inside of the market, is very convinced Trump is going to win." He pointed to both traditional markets and crypto markets as evidence, basically any industry that, "if we had deregulations will benefit from Trump"

Looking to markets as a predictor of politics is not new, nor are prediction markets for that matter; however, the size and liquidity of Polymarket is new. Polymarket, which has the largest and most liquid U.S. presidential prediction market, began the week with a widening spread, hitting 58.3% Trump on Monday.

While the mainstream media and many pundits caution against trusting the predictive power of Polymarket, I'd argue the Harris campaign is paying attention. Their actions this week certainly seemed increasingly desperate. On Tuesday, Kamala posted on X a pandering message directed at Black men. The bizarre message was full of head scratchers – a crypto related one promised that Harris will, "protect cryptocurrency investments so Black men who make them know their money is safe."

1) What

She then did an interview with the "enemy," Fox News, despite many pundits on CNN and MSNBC weeks ago opining that she'd no longer need to do interviews due to her lead. The interview didn't go well, and as a result Harris' odds of winning took a hit. Polymarket odds now stand at 60.5% Trump to 39.4% Harris at the time of writing. That's a rough week.

It's easy to see how a Trump victory would be good for crypto, given the former president has made statements like, "I am laying out my plan to ensure that the United States will be the crypto capital of the planet, and the bitcoin superpower of the world." He's gone as far as suggesting making Bitcoin a strategic reserve asset. So, Bitcoin would do well, and price appreciation in Bitcoin would lift the rest of the crypto complex.

Within crypto, I think outperformance would come from anything currently hampered by unclear regulation and antagonistic regulators. It's safe to say that defi will receive a lot of positive attention, seeing how Trump's new crypto venture World Liberty Finance is described as a, "defi money market platform." Regulatory clarity and cooperation from the government could help defi projects in many ways, for example by making traditional financial institutions more comfortable exploring partnerships or investments, giving many defi projects that run profitable businesses the ability to pass on returns to token holders, or deregulating, which would allow projects to operate with less oversight and more freedom. Outside of crypto tokens, U.S. based crypto-related publicly traded companies should do well, such as centralized exchanges, stablecoin issuers, and bitcoin miners.

Despite the excitement in U.S. election politics this week, seasoned reporters Matt Taibbi and Walter Kim noted at Racket News on Monday that the atmosphere felt unusually calm for being less than three weeks out, predicting things would get wilder—and they were right, leaving me to wonder if this is just the start of the ramp-up.

-David Sencil

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