Author: Tanay Ved & Matías Andrade Cabieses Source: Coin Metrics Translation: Shan Ouba, Golden Finance
Historically, Bitcoin has seen significant rallies after elections, but the gains have been decreasing in each cycle: about 8,000% (2012), about 1,750% (2016), and about 600% (2020). They usually coincide with the Bitcoin halving and major policy shifts by the Federal Reserve, forming a series of catalysts that reduce market uncertainty.
Historically, Bitcoin's realized volatility increases around the US election and usually remains high for about 30 days after the election.
Polymarket odds for the 2024 election have fluctuated wildly: from a tie in October, to a 34% lead for Trump, and more recently to a 62% Trump to 38% Harris. Trading patterns indicate strong international participation, with peak volumes occurring between 01:00-04:00 ET.
As the election approaches, trusted spot volumes for major currencies (BTC, ETH, SOL) are double the recent average at $19.7 billion, while Bitcoin futures open interest has reached a near-record high of $34 billion.
As anticipation builds for the 2024 U.S. presidential election, global markets are gearing up for possible outcomes that will have significant impacts on the dynamics of the digital asset and crypto ecosystem. A number of political developments have occurred in the run-up to the election, with prediction markets such as Polymarket playing an increasingly important role in predicting sentiment alongside traditional polls. For a deeper dive into how prediction markets and Polymarket work, see our recent SOTN issue, "Polymarket and the Power of Collective Wisdom". Now, as the election results approach, crypto markets are regaining momentum, with Bitcoin (BTC) breaking above $70,000, within striking distance of all-time highs. Looking ahead, the election results are likely to further shape the crypto policy landscape and influence market sentiment in the months ahead.
In this edition of the Coin MetricsState of the Network Report,we analyze Bitcoin’s (BTC) historical performance around previous elections, dive into market movements, and examine Polymarket data driven by the 2024 elections.
Since the potential outcomes of digital assets are top of mind for market participants, we can look back at BTC’s performance in past elections to see if they had a discernible impact.
Source: Coin Metrics Market Data
As each election approaches, volatility tends to increase as market participants process new information and adjust positions based on the outcome. The chart above shows actual volatility over a seven-day period, with volatility typically rising ahead of previous elections (2016 and 2020) and remaining elevated for about 30 days after the election. While volatility has been relatively subdued ahead of the 2024 election, it is likely that volatility will rise in the coming days.
Since early October, the odds of Donald Trump and Kamala Harris winning the presidential election on Polymarket have expanded significantly, from about 50% each to Trump leading by about 34%. However, in the last week, that gap has reversed, with Harris's probability of winning the election at 46%, closing the gap between the two candidates. Similar changes in odds have been seen on Kalshi, a regulated U.S. prediction market, as well as a number of other predictions.
Source: Coin Metrics Labs
We can further analyze trader activity on Polymarket for the 2024 election. We can use a simple heuristic to segment bets on Polymarket: if a trader trades more than 50 times and is for or against both candidates, they are classified as a market maker, thus distinguishing traders who only support one candidate from the casual traders who make up the rest of the activity on Polymarket. While market makers make up only a small percentage of the total number of traders on Polymarket, they drive a large portion of trades and volume on the platform.
Source: Coin Metrics Labs
One question about the election Polymarket transactions is based on the fact that Americans are not allowed to participate in these markets. We can start by looking at the normalized hourly volume of different prediction market contracts associated with Biden, Harris, and Trump, where there is a clear pattern that suggests that the majority of trading activity occurs outside of typical US trading hours. data-attrs="{"src":"https://substack-post-media.s3.amazonaws.com/public/images/3ec99d19-df3b-42ed-968f-c20475747ee6_1529x1415.png","srcNoWatermark":null,"fullscreen":null," quot;imageSize":null,"height":1347,"width& quot;:1456,"resizeWidth":null,"bytes":null,"alt":null,"title":null,"type":null,"href":null,"belowTheFold":true,"topImage":false,"internalRedirect":nu ll,"isProcessing":false}" alt="" srcset="https://substackcdn.com/image/fetch/w_424,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3ec99d19-df3b-42ed-968f-c2047 5747ee6_1529x1415.png 424w, https://substackcdn.com/image/fetch/w_848,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3ec99d19-df3b-42ed-968f-c20475747ee6_15 29x1415.png 848w, https://substackcdn.com/image/fetch/w_1272,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3ec99d19-df3b-42ed-968f-c20475747ee6_1 529x1415.png 1272w, https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3ec99d19-df3b-42ed-968f-c20475747ee6_1529x1415.png 1456w" sizes="100vw" loading="lazy">
Source: Coin Metrics Labs
While we do see some volume in the Biden win market during the US market hours, the highest volume period is always the US overnight session, especially 01:00-04:00 ET.
There has been a lot of discussion about the outlook for different sectors of the digital asset market and how the election results could affect their trajectory. Segmenting the market into majors (BTC, ETH, and SOL) and altcoins within the datonomy™ space (excluding on-chain derivatives such as stablecoins) shows a clear difference in credible 14-day spot volumes. Currently, major currencies are trading at $19.7 billion, while altcoins are trading at $5.4 billion. While major currencies are trading about 2x higher than past averages, overall levels remain relatively subdued, awaiting election results and potential policy changes to confirm directional trends.
Source: Coin Metrics Market Data Feed and datonomy™
While Trump’s victory was seen as positive for BTC and crypto assets more broadly due to his initiatives around Bitcoin and his involvement in World Liberty Financial, a DeFi , lending protocols), but how the various sectors react to either outcome remains to be seen. Heading into the election, some metrics could serve as indicators of changing market sentiment. The ETH/BTC ratio is at 0.035, close to levels seen in April 2021, while the SOL/ETH ratio is near its all-time high of 0.07. Speculative activity has intensified, with BTC futures open interest near all-time highs ($34 billion). As a result, implied volatility is expected to move further higher, reflecting market expectations.
As the U.S. election approaches, expectations are growing among global market participants and the crypto ecosystem. While the election results could impact the short-term trajectory of digital assets, the sector remains on a path of sustained, long-term growth as market uncertainty recedes. As we have seen in past cycles, Bitcoin has demonstrated resilience across multiple elections, solidifying its position as an apolitical macro asset. As the broader crypto ecosystem continues to mature, we can expect greater investment participation and deeper on-chain adoption to shape its evolution over time.
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