The results of the 2020 US election have been announced, but the impact on the crypto-asset market continues.
On November 5, Bitcoin continued to rise above the $15,000 mark, reaching its highest level since January 2018. Some analysts believe the U.S. election may have played a role. However, some crypto industry analysts believe that bitcoin’s rise at this point in time is simply due to the fact that its rising circle after halving is consistent with the US election cycle, and that the rise is fueled by the increasing accumulation of Grayscale.
Although the impact of the election on the price of crypto assets is not clear yet, this public event has given a real boost to the development of the crypto industry.
Recently, FTX, a crypto-asset derivatives exchange, has launched its 2020 US election contract trading section. According to data, this sector has seen a surge in trading volumes, generating millions of dollars in revenue.
The decentralized prediction market has also played a big part in this election. The Block reported that open interest on the prediction platform Augur recently exceeded $4 million. Polymarket, another decentralized prediction market, also benefited from the US election, with election-related market volumes exceeding $3.5m, or about 91% of the platform’s total volume.
Ethereum founder Vitalik Buterin has repeatedly expressed his enthusiasm for decentralized prediction market. From the perspective of the industry, fair, open and transparent blockchain technology can guarantee the fairness and justice of the prediction market. Unlike gambling, the prediction market can convey information to help people make decisions. In this time, this field shows its strength.
Bitcoin topped $15,000 during the election period
America’s election draws the world’s attention not just for its power but also for its customary volatility in financial markets.
As the 2016 election drew to a close, gold was off a roller coaster ride as the S&P 500 rallied.
At the time, bitcoin was under $1,000, and there was little market attention, thus there were no wild fluctuations in prices.
But as crypto-assets such as Bitcoin have grown in size in recent years, the emerging market has moved into the mainstream. The impact of the US election on the prices of assets such as Bitcoin starts to catch folks’ eyes.
On November 4, during the close of the election, the price of Bitcoin changed from the opening price of $13,708 to $14,058. The rally continued in the days that followed, with bitcoin trading at $15,500 as of 1 pm on November 6, its highest level since January 2018.
The US election is seen by some in the industry as contributing to the rise in bitcoin prices.
CryptoSlate wrote that the U.S. presidential election has long been seen as an important catalyst for economic trends and that potential shifts in power tend to change the direction of global markets, and Bitcoin is no exception.
Historically, the US election has indeed been a turning point in the price of Bitcoin many times, and often a positive one. For example, after the 2012 election, Bitcoin entered a parabolic cycle, and after the 2016 election, Bitcoin entered a bull trend. With bitcoin’s uptrend in recent days, some believe the 2020 election could mark the start of the next parabolic trend in bitcoin.
In the view of Huang Han, a special adviser of Bidhijie, as far as economic policies are concerned, both Trump and Biden will continue to implement low-interest rates and promote a new round of fiscal stimulus, which is a positive for the US stock market, and the continued rise of the US stock market will create a more favorable market environment for the improvement of the valuation of Bitcoin.
Others have suggested that the timing of bitcoin’s rise to coincide with the US election could be coincidental. Because bitcoin will be halved every four years, which is coincide with the US election cycle, and it historically tended to drive prices higher.
According to cryptography analyst Jins’ analysis of recent chain data, the amount of money transferred to BTC on November 3 jumped 25 percent from the previous day to $43.37 billion, indicating that investors’ trading moves are close to breaking out and that bitcoin’s direction may not be relevant to the outcome of the U.S. election. In his opinion, another reason for the rise of Bitcoin is the increase of Grayscale. According to the data, Grayscale Trust increased its holdings of 32,800 bitcoins in the past month. “BTC is likely to continue to increase its upward space driven by the institution”.
DeFi prediction markets grow fastest in the near term
While it is impossible to say with any certainty that the election had a direct impact on the price of Bitcoin, what is indisputable is that the US election has driven the development of the prediction market.
Back in February, FTX, an encrypted asset derivatives trading platform, launched its 2020 US Election contract trading section. And the contract products such as Trump 2020 and Biden 2020, allowing users to make “bets” by buying the presidential nominee’s token based on their predictions. Both “Trump” and “Biden” was priced between $0 and $1. According to the rules, if Trump wins US presidential election in 2020, the “Trump” token bought by users will be delivered at the maturity of $1, or $0 if not.
In the run-up to the election results, the product’s popularity grew rapidly, and the trend of “candidate tokens” reflected who had the upper hand in the election. On November 3, for example, Trump initially won more votes and looked more likely to win. The price of “Trump token” rose rapidly, reaching as high as 84 cents. On November 4th, however, things reversed and the Biden neared victory, with Trump token plunging to $0.12 and the Biden soaring to $0.88.
FTX has seen a surge in trading in The US election contracts sector in recent days, generating millions of dollars in revenue, The Block reported, citing sources familiar with the matter.
Not only these centralized exchanges, but the decentralized prediction market is also growing rapidly because of the U.S. election.
The US 2020 election has boosted the use of decentralized prediction markets, The Block said in a research report released on 3 November. Augur’s Open Interest, a simple rendering of the U.S. election market, recently passed $4 million, driven largely by Catnip. Exchange.
Polymarket, another decentralized prediction market, also benefited from the US election, with election-related market volumes exceeding $3.5m, or about 91 percent of the platform’s total volume.
According to The Block, most DeFi related metrics were down slightly in October compared to September, with DEX trading down 26.3%, but the prediction market is the fastest-growing sector of DeFi due to The US election.
Prediction markets are more informative than gambling
No matter in what field, people always want to predict the future development trend or the outcome of an event, so many indicators are created to help them make decisions.
“Yiwu Index” is one of the indicators. In the 2016 election, because Trump received far more props orders than Hillary, the small commodity bosses in Yiwu, China, ignored Hillary’s huge advantage in the poll support rate of 72% and predicted Trump would win the election. Finally, Trump did win.
This does not mean, of course, that the Yiwu Index is always correct, but it provides information that helps people make decisions and makes them more accurate in predicting the future. The prediction market, such as Augur and FTX, also generates “information” through market games. After all, no one wants to lose money, so investors will combine the information they have to make the right choice as far as possible. In the eyes of Ethereum founder Vitalik Buterin, prediction markets are even more accurate than polls and models in the US election.
On the surface, the prediction market looks a lot like a gamble game. In the case of the US election, users can lose all their principal once they have bought the loser’s token. Nevertheless, from the experts’ view, the prediction market and gambling are not the same, and cannot draw equal sign.
Instead of betting on size or dice, the prediction market is betting on a worldwide or public event, such as who will win the World Cup? What is Apple’s year-end price? “Betting against these public events produces information that is useful for decision-making, whereas gambling games do not.”
So, does the combination of blockchain and prediction market have development potential?
The above experts believe that fair, open and transparent blockchain technology can guarantee the fairness and justice of the prediction market, reduce the risks of black-box operation, and lower the commission fee. So, the blockchain system, with its own payment function and native cryptocurrency, is a natural fit for this market.
At present, the development of blockchain prediction market is still in its early stage. Augur, the first decentralized prediction market, was launched in July 2018 based on the Ethereum network, allowing any user can create a prediction market around any future event, and other participants can bet on the outcome of that event. This means that Augur is meaningfully when users are highly engaged.
At first, Augur received little attention and was illiquid, invisibly increasing the risk to participants because it was mainly traded using the volatile ETH. However, during this year’s DeFi boom, The Augur V2 came online, bringing in the stablecoin DAI, and using the 0X protocol to increase trading depth and smoothness. Augur rose to prominence in the wake of America’s presidential election.
Polymarket, an emerging forecasting market platform launched this year, is starting to make its mark. It is more “snicker,” using the AMM mechanism to provide liquidity for each particular prediction market and the option to buy a USDC with a credit card.
In addition, EOS developers are also starting to look at this market too. The Everipedia team of Wikipedia-like applications has created PredIQt. Similar to Augur and Polymarket, it allows users to create their own markets, except that the platform supports both order book and AMM transactions.
Although the prediction market is still a niche of DeFi compared with decentralized applications such as lending and trading, it has gained more attention with the election, and Vitalik has also been Shouting for it. In September, he tweeted that the prediction market platform is probably the most underrated category of DApp, and he advised Libra project directors to follow this kind of project.
This market could become the next big thing in blockchain developer layouts, thanks to the fun of predicting the future and the rewards and sense of accomplishment that users get from making a successful prediction. Of course, it is not easy for anyone to foresee the future, and at all times, participants should control the risks.
Do you think the market will grow?