Bernstein Questions: Is Polymarket Biased Against Trump?

Analysts at Bernstein have expressed that a victory for Donald Trump in the upcoming election could have a positive impact on Bitcoin and the crypto market. They emphasize that both candidates show increasing support for crypto assets, which mitigates significant risks, although a variety of potential Bitcoin price outcomes could still occur in the short term.

In a recent communication with clients, Bernstein analysts explored the notable shifts in betting odds on Polymarket— a leading platform for election predictions, with over $1.5 billion in betting volume—and their implications for Bitcoin prices.

1) The Polymarket Odds: Odds on Polymarket have recently swung in Trump’s favor, particularly after a rally he held with Elon Musk in Butler. Trump’s odds increased by 6% in just 24 hours, surpassing those of Kamala Harris, who had maintained a lead in the market for several weeks. This development contrasts with national polls, where Harris continues to hold a slight edge, indicating a significant gap between betting market trends and polling data.

2) What Do the Polls Say?: Despite the changes on Polymarket, traditional polling results offer a different narrative. The race remains highly competitive, with Harris averaging a 3% lead. Bernstein notes that Nate Silver’s Bayesian model, which synthesizes recent polls to track trends, currently gives Harris a 3% advantage while emphasizing the tightness of the race.

3) Swing State Markets: Polymarket shows Trump leading in several key swing states, including Arizona, Georgia, and North Carolina, where his lead exceeds 20%. In Pennsylvania, his advantage increased to 9% post-rally in Butler. However, Harris retains a narrow lead in Michigan and Wisconsin, although these margins have narrowed considerably.

4) Polls vs. Polymarket: Bernstein also highlights a historical trend where polls have underestimated Trump’s support, evident in the 2016 and 2020 elections. This raises questions about whether Harris’s polling lead is sufficient for a convincing victory. Until the recent surge for Trump, Polymarket had aligned with Harris’s polling advantage, marking a significant divergence since Harris’s nomination.

5) Is Polymarket Trump Biased?: The analysts considered the possibility of a pro-Trump bias in Polymarket, given its blockchain foundation and Trump’s favorable stance towards crypto. Nonetheless, they argue that the robust liquidity and volume of bets reduce the likelihood of the market being biased. The analysts noted that Harris had consistently led in odds until Trump’s recent increase, and since crypto investors are typically already positioned long in crypto, they might lean toward supporting Harris as a protective measure. Thus, it’s anticipated that crypto investors would show more demand for Harris, and that Polymarket includes a broader range of bettors beyond just crypto enthusiasts.

6) What Should Investors Do with Bitcoin and Other Crypto Assets?: Bernstein believes that Bitcoin is positioned to benefit from the election result, driven by factors like low interest rates and U.S. fiscal deficits. However, they predict that a Trump win could potentially propel Bitcoin to between $80,000 and $90,000, while a Harris victory could see it drop to around $40,000. The market is expected to remain sensitive to election developments until clearer trends emerge.