What We See in the Markets: Markets vs Polls - Crypto's Election Conviction

Keep up with the latest in crypto research as we share the insights from leading institutional research players.

In this edition, we share what Cumberland sees in the markets with the upcoming US Presidential election and the divergence between polling and crypto market sentiments.

Good Morning from Cumberland APAC! The US presidential election is a week away, and it’s the only story that crypto markets are following. Most of the polling data has this as a close race, with a slight but not insignificant advantage to Trump. While Harris leads slightly in the national polling average, it’s the swing states that will end up mattering. In the most recent polls, it’s essentially even in Wisconsin, Nevada, and North Carolina, Harris leads slightly in Michigan, and Trump leads in Pennsylvania and Georgia. Crucially, all of these are well within the polling margin of error; either candidate could end up sweeping all six. From the polling data alone, this looks on paper to be the closest race in recent memory.

Markets, however, are not treating it that way. The most notable example of this is Polymarkets, which now has Trump as a two-to-one favorite. This market was even at the beginning of the month, but has moved in one direction over the past thirty days. There’s pretty good evidence that this move was pushed by a handful of large wallets, but this is no longer isolated. Over the course of the past week, BTC has rallied within spitting distance of its all-time-highs, clearly reflecting a market view that crypto-friendly Republicans will be in office. DOGE is up 23% on the week; if Trump wins, Elon Musk will likely head the still-to-be-formed Department of Governmental Efficiency (get it?). Trump Media Group (Truth Social) has bounced from $12 a share at the start of the month to $51, as good a proxy as we will get for what markets think will happen next week. The polls might be close, but the market doesn’t generally trust polls, and the market is showing conviction here.

It’s possible that the market, and the crypto market in particular, is showing too much confidence in a Trump win; it also might be overly confident about what a Trump win would mean for the price of crypto. While regulation drives adoption, and adoption drives price, it has historically been monetary liquidity which has had the most meaningful impact on crypto prices, and the two parties are largely similar in monetary policy and deficit spending. This rally is showing a lot of confidence in not only what will occur next week, but what it will mean, and overconfident markets tend to face corrections, especially when they’re leveraged. BTC vol expiring after the election is trading around 67, the highest we’ve seen in the past year, and OTC options markets have been trading with high volume, so traders are locked-in, with all eyes on the election. Happy trading!

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