This Week in Prediction Markets
It’s market mania as President Joe Biden declines to run for a second term. The news has sent shockwaves through the prediction markets, with bettors scrambling to take a position on the implications of this historic decision.
Biden’s Decision: A Turning Point in Politics?
Joe Biden’s decision not to seek re-election is not entirely unprecedented. U.S. presidents from James Polk to Lyndon B. Johnson have declined to serve another term for one reason or another. However, what is unique about Biden’s decision is its timing – only a month before the Democratic National Convention and just days after he told party faithful that "elites" wouldn’t succeed in kicking him out.
The decision has fueled a surge in bets on election-related contracts on the Polymarket prediction market, pushing volume to levels never seen in the platform’s history. According to a dashboard powered by Dune Analytics, daily volume on the platform pushed past a record $28 million as bettors raced to take a position on a presidential race that’s unlike any other in recent history.
Record-Breaking Volumes and Activity
In comparison, a month ago, the platform was doing $4 million to $5 million in average daily volume in the aftermath of the debate between Biden and Donald Trump. The number of daily active accounts, or wallets, has also more than doubled in the last month, up to nearly 6,000 from roughly 3,000 a month ago.
Bettors have pooled well over $500 million on some of the largest political contracts on the site. The market for the U.S. presidential election winner has $319 million invested, one for the Democratic nominee is over $212 million (Vice President Kamala Harris is the overwhelming favorite), while another to decide who will be the Democratic candidate’s vice presidential running mate has $10 million.
Can Polymarket Hit $1 Billion?
With Biden out of the picture, the number to beat is $744 million, which was how much was bet on Betfair, the U.K.’s largest betting platform, for the 2020 election. But it’s only July; there are still 3 1/2 months until the election. The question is, will Polymarket hit $1 billion?
A Meme Coin Cat Topped $1 Billion
Meanwhile, a Polymarket bet on market capitalizations for cat-themed tokens resolved late on Sunday, with the Solana-based pop cat (POPCAT) winning the race. The contract asked the burning question: Which cat-themed meme coin would be the first to hit a $1 billion market value?
In early April, POPCAT’s odds looked bleak at 2%, behind Keycat and Hobbes, two other cat-themed tokens. The market racked up $4.6 million in trading volumes since going live in March.
Market Manipulation?
The resolution drew some drama, however, after a single $630,000 buy of the token apparently caused a spike that helped push it over the $1 billion market cap threshold – with some arguing it was an act of market manipulation. "Okay so this is interesting because that’s clearly market manipulation, but technically it did cross $1 billion on 1 website," wrote Polymarket user @The_Guru55.
"Literally a 1 second pump with 1 order on 1 website is pretty questionable," the person added. However, Polymarket’s decision that POPCAT won remains in place and has not been disputed as of Monday.
CrowdStrike’s Folly: A Fix That Took Longer Than Expected
A faulty patch for security software CrowdStrike pushed out on Friday sparked chaos, as it bricked Windows computers around the world, first in Europe and Asia during their business days, then the United States, as the country woke up. The Polymarket market was fairly certain this wouldn’t be a huge deal and a fix would happen by Friday night, putting the odds at 89%.
However, the market was wrong. As CrowdStrike engineers published instructions on how to do an initial fix – which required a significant amount of effort for each locked PC – the problems compounded. Over 2,500 flights were canceled and 8,000 delayed, with Delta Airlines still rebooking passengers as of Monday.
The "Worst Nightmare"
"The scenario of any [anti-virus] software pushing an update that behaves like this has been a ‘worst nightmare’ for two decades," Steven Sinofsky, the former president of Microsoft’s Windows division, posted on X. The "no" side of the contract – those betting a resolution wouldn’t come Friday – was lightly held, with only three bettors holding a collective 45 shares.
In total, just over $90,000 was on the line. Meanwhile, the largest holder of the "yes" side lost $2,800.
