Gate.TR/Sönmez: Prediction Markets Take Center Stage in the 2024 U.S. Election Season
Forex - With just hours to go until the first results of the highly anticipated 2024 U.S. presidential election, which is being dubbed as an election year, the impact of prediction markets on investor sentiment has intensified. It is reported that the amount wagered on Kalshi, a prediction market approved by U.S. courts at the beginning of October, has surpassed $123 million for predicting the election winner, while the crypto-based Polymarket, closed to U.S. users, has hosted $2.7 billion in trades.
Kafkas Sönmez, CEO of Gate.TR, shared his insights on the matter, stating, “We have reached the final stage in the U.S. elections, which have dominated the market's agenda throughout the year. Undoubtedly, prediction markets have become the biggest phenomenon of this year's elections held every four years in the U.S. While initiatives like Polymarket overshadow traditional polls and change the rules of the game, experts warn about the risks associated with these markets.”
Prediction Market Grows by 565%
Despite expert warnings, the growth volume of prediction markets was measured at 565% in the third quarter. Data compiled by CoinGecko reveals that the volume in the three most popular prediction markets exceeded $3.1 billion in the third quarter, significantly higher than the $466 million recorded in the second quarter. The largest volume participation on Polymarket was observed in the survey regarding the U.S. elections.
Kafkas Sönmez emphasized that the amount circulating in prediction markets, especially in the final stretch of the election race, directly affects the volatility in cryptocurrency markets. “Last week, Bitcoin hovered around $73,500, close to its all-time highs, while Polymarket, the most popular prediction market, gave Donald Trump a 67% likelihood of victory. Over the weekend, predictions for Trump rapidly decreased in value, while forecasts for Democratic candidate Kamala Harris moved upward. For instance, this shift in predictions caused Bitcoin to dip below $68,000. As Trump’s odds dropped, Bitcoin also declined,” he remarked.
“Caution is Required Against Manipulation Risks”
Pointing out that the approval of the non-crypto-based prediction market Kalshi by U.S. courts has given a sort of legitimacy to this phenomenon, Kafkas Sönmez indicated, “However, the realism of trading and volumes in crypto-based markets like Polymarket has been questioned throughout the election period. Separate studies conducted by two blockchain companies in the U.S. revealed that activity on Polymarket showed signs of wash trading, which involves manipulating volume and activity by buying and selling assets/contracts simultaneously and repeatedly. One of these studies concluded that about one-third of the volumes on Polymarket fell into this category. All of this increases the misleading nature of Polymarket results and undermines its legitimacy. In 2020, election results were clarified within four days, and in 2016, they became clear the next day. However, results for this election, which has many signs of being neck and neck, may take a bit longer to finalize. Relying on sources susceptible to manipulation like Polymarket could increase risks for investors,” he added.
Bitcoin Volatility Hits Three-Month High
Describing the landscape of the cryptocurrency market as characterized by speculations about spot Bitcoin ETFs, lawsuits, rally expectations, realized increases, and developments in the regulatory environment, Gate.TR CEO Kafkas Sönmez noted that the outcome of the 2024 U.S. presidential election will lead to a realignment.
“Undoubtedly, we are experiencing days where volatility in all crypto assets, especially Bitcoin, has drastically increased and will continue to rise. Bitcoin volatility has reached a three-month high. The VIX fear index, which tracks traditional markets, has been hovering above a certain level for days. At Gate.TR, we remind our users that elections are decisive for short-term market cycles. Based on our international resources and general media scans, we anticipate days that will require investors to avoid panic selling or buying. During such periods, having a certain amount of liquidity that can be activated at any moment, while considering a more general strategy, may yield better results in the medium and long term. As Gate.TR, which offers easy trading opportunities with Turkish lira across over 200 pairs, we will continue to be the gateway to crypto for our users during this dynamic process,” he concluded.