Examining Trump Vs Kamala Debate

Examining Trump Vs Kamala Debate and Polymarket’s Reaction to Election Odds

The market is now turning its attention to the upcoming U.S. presidential election. While the economy remains a focal point, the candidates’ positions on digital assets could significantly shape the future of digital assets. Vice President Harris’s stance on digital assets remains unclear, but former President Trump has been a vocal supporter of Bitcoin and the broader digital asset sector. Former President Trump announced his plans for a strategic bitcoin reserve earlier this year at the Bitcoin Conference; this, paired with his family’s involvement in a borrow-lending DeFi project called World Liberty Financial, further underscores his commitment to the sector. 

On Tuesday, all eyes were on the debate between Vice President Kamala Harris and former President Trump. Trump began with a 7% lead over Harris on Polymarket, a crypto prediction platform with over $870 million wagered on the election outcome. However, as the debate unfolded, Trump’s lead quickly eroded. By the end, Harris had overtaken him, and Trump ended the night 3% lower than where he started. 

As illustrated in Figure 1, Bitcoin's price movements closely mirrored the shifting Polymarket odds, responding in real-time to changes in the perception of Trump’s chances of victory. At the start of the debate, Trump held a lead with odds at 52%, while Bitcoin was priced at $57,616. As the debate unfolded, Trump's odds steadily declined to 48.6%, while Bitcoin experienced a corresponding dip, reaching a low of $56,731. Meanwhile, Kamala Harris, who began the night with odds of 46.%, saw her chances improve to 49.3%, reflecting a shift in market sentiment. This parallel movement between the odds and Bitcoin's price underscores how closely the crypto market tracks political developments, especially during key events that could influence future regulation or economic policy.

Bitcoin, often viewed as a hedge against political instability and currency debasement, reacted dynamically to the changing odds. While it is a neutral, bipartisan asset in the long term, Bitcoin’s short-term volatility often reflects market sentiment during periods of uncertainty. The debate created an environment where traders and investors were closely watching both political and market outcomes, and Bitcoin’s price fluctuations during the event were a clear response to the evolving predictions. This highlights the growing role of crypto in reacting to geopolitical events, reinforcing its position as a sensitive indicator of broader economic and political risks.

_{Figure 1 – Polymarket Odds (Left) and Bitcoin Price (Right): 10-Minute Intervals from One Hour Before to 1.5 Hours After the Trump vs. Kamala Debate}

Figure 2 extends the time horizon to June 1, 2024. It can be seen that bitcoin’s price has closely mirrored Trump’s election odds in the latter half of the year. Over the past three months, in addition to the debate, three major events have significantly influenced both the market and the election cycle.

• President Biden drops out of the election: On July 21, President Biden announced he would not seek reelection, leading to a negative reaction in the crypto market. Bitcoin dropped 4% as the market adjusted to a diminished likelihood of a Trump victory, given the digital asset market's perception of Trump as favorable for crypto regulation. In the two weeks following the announcement, Trump’s election odds declined from 64% to 53.5%.
• Vice President Harris Becomes the Democratic Nominee: On August 5, Vice President Kamala Harris officially secured the Democratic Party’s nomination for president. Although the market had been expecting this, the announcement caused a 6% drop in Trump’s election odds, as this signaled a unified Democratic party. Interestingly, August 5 also marked a local bottom for Bitcoin at $54,000, coinciding with the end of the Yen Carry Trade unwind, making this event somewhat of an outlier.
• RFK Jr. Drops Out and Endorses Trump: During the week of August 19, rumors began circulating that RFK Jr. would drop out of the race in key battleground states and endorse Trump. On August 23, these rumors were confirmed. Bitcoin surged 8% that week, and Trump’s odds of winning rose by 4% as market participants anticipated RFK’s voters shifting their support to Trump.

As Trump’s election odds have closely mirrored Bitcoin's price movements, it's important to understand why the digital asset market views him favorably. Trump has garnered support from segments of the crypto community for several reasons. His open advocacy for Bitcoin and the broader digital asset sector, particularly with his announcement of a strategic Bitcoin reserve, resonated strongly within the community. Furthermore, his personal holdings of over $6 million in cryptocurrency, including $2.3 million in Ethereum, align his interests with the industry.

Trump’s connection to the crypto space was further solidified in December 2022 when he launched a collection of NFT trading cards on the Polygon blockchain, which sold out quickly and raised millions. Following the success of his initial release, he launched two additional NFT series, deepening his engagement with the digital asset market. Additionally, Trump has promised to fire SEC Chair Gary Gensler, who has been widely criticized by the crypto industry for his unfavorable stance and perceived unfair treatment of digital assets. Many in the industry believe that a Trump presidency would bring a more favorable regulatory environment, encouraging innovation and wider adoption of digital assets. These factors have reinforced the market's perception of Trump as a candidate whose policies could positively influence the future of crypto.

_{Figure 2 – Polymarket Odds (Left) and Bitcoin Price (Right)}

While Kamala Harris’s stance on cryptocurrency remains relatively unclear, as she has not made any definitive public statements on the issue, she has begun to engage with the industry indirectly through her support for broader technology and innovation initiatives. As part of her campaign agenda, Harris has been a strong advocate for emerging technologies, including artificial intelligence, signaling a potential openness to engaging with blockchain and digital assets within a wider tech-driven strategy. However, compared to other candidates, her position on digital assets remains ambiguous, leaving her potential regulatory approach uncertain for the crypto industry. This uncertainty has led many digital asset market participants to favor Trump, who has been publicly more open and supportive of the crypto space.

Although Bitcoin may show short-term reactions to specific events, it remains a neutral, bipartisan asset, serving as a hedge against currency debasement and political instability. Its ability to respond to political moments like the debate underscores its sensitivity to market sentiment, yet Bitcoin's true strength lies in its role as a long-term safeguard against broader systemic risks and uncertain times. Bitcoin is increasingly viewed as both a flight-to-quality and flight-to-safety asset during uncertain times, as demonstrated during the regional banking crisis in March 2023, when investors turned to Bitcoin as a hedge against traditional financial system risks and instability. Regardless of the political outcome, Bitcoin's value proposition remains compelling, making it a valuable addition to a diversified portfolio due to its unique properties and resilience.

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