Biden\'s Blunder Ignites Trading Frenzy on Polymarket

Odds that the president will drop out of the race surged as high as 50% after the debate before leveling off at 40% on the crypto-based prediction market.

U.S. President Joe Biden's performance at last week's presidential debate was an unmitigated disaster. The New York Times' editorial board, usually a source of stalwart support for a Democratic White House, is calling on him to step down. A CBS/YouGov poll says that 72% of voters believe that Biden does not have the cognitive health to serve as President.

This was a betting bonanza for users of Polymarket, the crypto-based prediction market platform. Biden's odds of becoming President dropped from 33.5% pre-debate to 18% as of Monday morning U.S. time, with Trump solidifying his lead at 63%.

Another contract, this one about the possibility of Biden dropping out of the race entirely, also rocketed off in trading volume post-debate, with "yes" shares hitting 44 cents in the hours after, up from 19 cents prior. Each share pays out $1 (in the USDC stablecoin) if the prediction comes true and zero if not, so the 44 cent price indicated a 44% probability Biden would bow out.

A story from NBC that Biden was to spend the weekend with his family at the Mount David Presidential retreat to discuss the future of his campaign pushed the odds up to 50%. Those odds leveled out to just over 40% as of Monday morning U.S. time as over the weekend the White House pushed back on reports, saying the trip was pre-planned.

For his part, President Biden is adamant that he will remain in the race.

“I understand the concern after the debate. I get it,” NPR quoted the President as saying to a room full of donors. “I didn’t have a great night. But I'm going to be fighting harder and going to need you with me to get it done.”

The contract has attracted serious political bettors, with the largest holders on both sides of the digital aisle largely betting on politics-themed markets.

"Therealbatman," the largest No holder, holds $2.9 million in different political contracts, consistently betting that Biden and Trump will win their respective nominations, that Biden will win the popular vote, and that Trump won't win the U.S. Presidential Election. The only exception to Therealbatman's largely political portfolio involves a $50,000 bet that the Eigen token, the native token for the Eigenlayer protocol, won't be transferable before former Binance CEO Changpeng "CZ" Zhao, gets out of prison.

On the other side of the aisle, the largest holder of the "yes" side of the Biden drop-out contract, an anonymous user only known by his or her Ethereum wallet address, holds a $184,000 position on Biden's fate, as well as a $6,200 stake that Michelle Obama will with the Democratic nomination.

This user also has a $9,700 bet that longshot independent candidate Robert F. Kennedy Jr. will win the presidential election, which is currently trading at 2 cents.

Bitcoin price predictions

Traders on prediction markets have mixed opinions on where the price of bitcoin is going.

In the short term: stability.

A Polymarket contract gives bitcoin a 78% chance of being above $61,000 by July 5.

For reference, CoinDesk Indices data had bitcoin trading above $63,300 for most of the Monday business day in Asia, a marked recovery from its tests below $60,000 as last week began.

CoinDesk Indices' Bitcoin Trend Indicator notes that the world's largest digital asset is in a period of "significant downtrend."

Here's where things start to get complicated. The markets "tea leaves" that bettors are trying to read put us in for a correction before a rally that might test BTC's all-time high.

First, one contract on the U.S.-regulated Kalshi platform projects a 65% chance of bitcoin dipping below $50,000 by the end of 2024 and a 22% chance of it reaching below $40,000. At the same time, another contract projects a 70% chance of BTC hitting $75,000 or above by the end of the year.

Unlike Polymarket, which does business almost everywhere except the U.S., Kalshi is U.S.-only, and its bets are settled in dollars.

There are a couple of indicators that the market expects bitcoin's price to be challenged by continued dollar strength. This will certainly subside once the Federal Reserve begins to cut rates, which bettors are almost certain will happen by the last quarter.

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