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Crypto Update | Election Night Insights: Prediction Markets Don't Tell the 'Full Story,' Mark Connors Says
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Mark Connors
Meme Coins trade on average about the same number of shares as the S and P. I think that if I had to say something, it's about a disenfranchised group of people that want to be involved in something. The home ownership, equity ownership. The wealth gap is just widening as people can't buy real assets. They really want to be engaged and call it emergent or just even basically story coins.
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Jen Senassi
It's Monday, November 4th and this is Markets Daily, hosted by me, Jen Senassi. Today's episode is sponsored by Stand with Crypto Alliance. On this show we navigate the current shaping the crypto markets, providing insights against the broader financial landscape. So whether you're actively trading or simply fascinated by the volatility that is the.
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Crypto Advocate
Crypto markets, this show is your compass.
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Jen Senassi
To understanding what's happened, where we are and where we are going. Good morning everyone. Joining today's show is head of Global Macro strategy at onramp Bitcoin, Mark Connors. Mark, welcome back.
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Mark Connors
Jan, thanks. Good always to be ripping on markets with you, especially, you know, T minus one on election day.
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Jen Senassi
Well, that's exactly it. One day before the elections. Crypto folks are really watching what happens here. You know, folks who've listened to the show, I'm sure, you know, analysts were calling Bitcoin a Trump trade that has kind of eased. Now, before we dive into the nooks and crannies that I want to talk about with you, what are you watching? What should investors be watching as we go into election day?
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Mark Connors
Well, if you want to, you know, hit your dopamine centers and just get that Rush, you know, certainly look at the prediction markets because they are the most variable and volatile. But Jen, as we were just talking off, you know, off screen in the green room, they also don't necessarily tell the full story by just looking at, say the trumpet lead of 65 versus 35, dropping to 55, 45. So what we're trying to do here is, and we did with a call with our clients, is give context. Those prediction markets are not based on sentiment alone. And this is a point that I think I wanted to hit with you right off the bat is that when someone places a bet two weeks ago that goes from 55% Trump to 65 on say, Poly market or predict it and it starts to narrow, that person is incentivized to close it out because the risk reward of that trade declines as we get closer to expiry. People call it negative gamma if you're a volatility professional. Otherwise it's just risk reward. So look at that if you want. But if you really want to know what's going on, we suggest stepping back to more structural things, things that Fidelity that think at blackrock have looked at to enrich their coffers and made the right decision. So look at narrow things, Jen, if you want, but this is too close to call right now, and we think it doesn't matter for crypto investors.
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Jen Senassi
Well, that's really interesting because the narrative that's been attached to prediction markets months leading up to this election has been that the true sentiment can be measured by how everyday people are placing their bets on various different prediction markets, even though some are not even available to US Citizens. Talk to me a little bit about why you think that is, why this narrative has been attached to it. And what you've just outlined has not really been discussed in the mainstream media. And now tell me, you know, where we should be looking if we want to see general sentiment.
- [04:42]
Mark Connors
Okay, Bitcoin's been a great predictor, and Trump's big lead from a week or week and a half ago in any of the prediction or polls has gone down, the lead's declined, and bitcoin is reacting to that. So bitcoin still is the best predictor of immediate Dynamics. But then we always say zoom out and look at what bitcoin has done over the past year, five years, 10 years, and that's the real trend. But back to the what people are listening to you for today is what can you tell me today about tomorrow? And what you're getting at is what has been said about the prediction Markets is wrong because they've limited it to say it is a momentum factor, that it is better than polls. It's not. It's different. It does tell what people feel about the candidate today with their money. But given that polls are about a moment in time with no commitment beyond the words offered the pollster, prediction markets are about how to manage that investment to expiry. And as you get closer to expiry, your risk reward changes. So people are incentivized to maybe take their trade off a day before and lock in their games. You don't have that with a poll. So very different. It is not a momentum. There's also a risk management dynamic to your money that also is involved. So they're incentivized by two things, to make a bet on what they feel about the candidate and also to manage their money. And that second part, Jen, is not talked about in general media, and that's what we're seeing over the past couple days is people managing their gains on the Trump trade, the prediction markets.
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Jen Senassi
What's bitcoin telling you about where we are, where we sit today?
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Mark Connors
It's. I am going to be just tried and true to what you might hear from every bitcoiner, is that day in, day out, no idea. Like volatility, you know, it's. It's like I'm a Rocky fan, you know, Rocky 1, 2, 3, 4. By the time you get to 5, it went off the rails. But Rocky 3 wasn't bad. When Clubber Lang or Mr. T jumped in and they asked what his prediction for the fight was and he said, pain. We're going to have volatility, Jan, tomorrow, no doubt, because we're not going to know the result for days. And in listening to some pundits, especially out of Axios, I think his name is vanderhei. Excellent counsel for people saying don't take a delay in the election results as an indication of, of wrongdoing or poll interventions by other candidate. Our system can't handle a close race. It's going to take a while. So bitcoin's going to be all over the map, up and down. I would say anywhere between 5 to possibly 12% or more in the next couple days. But we think, as we said in the note to you and then what we put out in our weekly roundup, whoever goes in there is going to continue to be a deficit spender, Jen. It's just going to happen. And we know what that does for bitcoin. And then on stablecoins, probably the number Two use case in digital assets. That industry is only growing and the treasury just released something saying they're interested in regulating and making adoption of Treasuries compulsory for all stablecoins. So I think the government's in on stablecoins. They obviously have forgone any kind of intervention on Bitcoin given Judge Rao's decision last year that unleashed the spot Bitcoin ETFs. So it is really off to the races. Bitcoin leading 59% market dominance and then the other technologies behind it.
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Jen Senassi
You mentioned your note there. You said that some things are inevitable no matter who's elected, like debt issuance, which you just set me up for here. Dig into that a little bit deeper for me. What does that mean as we head into 2025 if we are looking at investors who are watching the crypto markets closely?
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Mark Connors
Yeah, if you're an investor, look at the trend in Treasuries. You know, Treasuries has been a store of value. It's 40% of that multi 20 or $30 trillion, 60, 40 trade. You know, people allocate to bonds, equities, maybe low commodities, alternative assets. That's about 85% of the portfolios out there for investors, institutional and retail. That $300 trillion of bonds over the past 20 years have returned about 3, 3.5% compounded that barely kept up with CPI, which is wrong. So what's happened is Treasuries gave you 3% over 20 years. They're now down over the past five years. Bonds are down over the last year. So the more debt that has come over the past 20 years has limited bonds from returning nominal or real gains. So yes, the deficit that we've seen grow from say Clinton's era of being flat to now approaching 7%. There's no way out of it. You have to continue to issue debt. And China's done it, Japan's doing it, and now the US is doing it. That favors finite assets like gold, which is up 32% this year. Jen. That's the biggest gain for gold. If we close this year out since 1979. Like, that's why I go back to the Rocky movies. You have to go back in time to really get context for the degree of inflation we're in. Like John, you know, Paul Tudor Jones. All roads lead to inflation, Jen. As a debt issuance, as a person that's indebted or a country, that just means that your cost is going up, you either going to fail or fund. Jen, Both candidates will fund and that Means that bitcoin and gold are going to outperform.
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Jen Senassi
Well, you bring up the past and I want to take a journey through the past right now and do some compare and contrast. I know that in your note you noted that overlapping bitcoin halving cycle and the US Presidential election is worth exploring. Talk me through this and let's start to what happened to the price of bitcoin after previous elections. Can we use some of those data points and apply them here?
- [11:03]
Mark Connors
We can and I'm not going to conflate as people say, fitting graphs and telling a story, but we do like persistent themes. So to follow what you brought up is the last two elections, 2016 election, I think Bitcoin was around $700 if that's correct on the graph that we shared earlier. And we know that what happened, bitcoin went up to 20,000 by the end of 2017. That was a function of really this cycle. And then we obviously had to crash after 2018. As we entered 2020, I think we had about a $13,000 Bitcoin price. We had a lot of volatility around that because of COVID around that election. But it ended up obviously going up to 69,000 as we know in November of 21, about a year later. And then we had the crash and now where are we, you know, 69, $68,000 going in here if passes prologue, you know, six figure Bitcoin is on everyone's bingo card. We really don't like focusing only on price except to say look what has happened over time. Bonds have failed as a store of value. Bitcoin's been adopted. And besides the graphs, just look at the players. Treasuries out now saying that stablecoins they're going to be looking at, they have passed on trying to control Bitcoin. They're sort of observing it like a curiosity because they can't control it. And as they do that, look what again the major asset managers have done. They have adopted it. It's the fastest growing ETF ever to 5 and 10 billion. It did it in 44 days. And I think a JP Morgan S&P ETF about a decade earlier did it in 200 days. I mean people aren't ready. People are still trying to understand how Bitcoin can now have a market cap that's greater than Warren Buffett's Berkshire Hathaway. I mean those little facts or why Citibank stock is lower today than it was in 1993. These slow moving dynamics are having real impacts on assets. But the pros have picked up their ears because they know they need to be involved and the election is a great earmark. Just step back and say what's happened in the early ones. Like you notice. Well, they overlap with the bitcoin halving. Halvings have usually been a regime change and we see no reason why we won't see that type of price action again.
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Crypto Advocate
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Jen Senassi
That's bitcoin. What about eth and other alts that are out there? I feel like bitcoin falls a little bit of a different narrative these days. As you mentioned, there's the etf. It doesn't seem like regulators are even looking at bitcoin as properly decentralized. But ETH and other alts in the crypto ecosystem don't follow that narrative anymore. They really have separated. Talk to me about what you expect to see in the world outside side of bitcoin after the.
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Mark Connors
And as you know, our firm focus on bitcoin, but we're keenly aware of, you know, the other 40% of assets which are dominated by stablecoins, Ethereum and then the rest. I think Ethereum is going to, you know, it's obviously been Solana summer and you know, meme coin frenzy. You know, it's been a barbell market, no doubt, and we think that will continue. While we don't focus a lot on meme coins, I think look at your firm. People are going to CoinDesk for not just news, but also like the indices that you, Andy Bear, put out there, you get adoption. Why? Because you're addressing a need. And in the meme coin community, there is a need for community as we get more splattered as people are working from home. So I think it's a window on Salon in the meme coin summer is a window on people's need for community, which is not being fed in a traditional sense. So that's probably not going away. But let's look at really eth, Eth I think is going to be the rails that the central banks use to move from an analog world to a digital DLT world. Now it won't be fully decentralized because, you know, be adopted. I mean, JP Morgan's building on it with their Onyx system. They've been doing it for over five years. The bank for International Settlements is working with several, you know, the Monetary Authority of Singapore and other central banks to do a wholesale cbdc. I mean that's happening. So those rails will be used but more for tradfi adoption. And we know how big that market is. So who are the winners? There to be seen about how that plays out as central banks come in. But the direction of travel is all digital all day by everybody because the margins on businesses and banking are just going away. As I said, the stat about Citibank still, Jen, I've had no one respond to with a rational reason why that investment is seen as a, you know, in any indices, the stock is down lower today than it was in 1993. It still has 240,000 people, almost the same amount of people as it had before. They're not going to make the shift. You know, the only way to save any of these folks is to take their tech stack and throw it on rails.
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Jen Senassi
First, I want to say I love a good Andy Bear shout out. So thank you for that. What a great guy.
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Mark Connors
Yep, he brings it every day and all day.
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Jen Senassi
Okay, Mark, I have a little bit of a philosophical question for you. You mentioned the meme coin frenzy. What does that tell you about where we are in the economy and investor sentiment?
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Mark Connors
Meme coins trade on average about the same number of shares as the, as the S and P. So I think that if I had to say something, it's, it's about a disenfranchised group of people that want to be involved in something. I mean the, the home ownership, equity ownership, the wealth gap is just widening. So as, as people can't buy real assets, they really want to be engaged in, in even, you know, call it emergent or just even basically story coins just to be involved in a community. So unfortunately, I think it's like, it's like fast food. Yeah. You know, it might serve you today, but it's not really going to make you healthy. So I don't think it's a wonderful window on our economy. I think it's a reflection of a disenfranchised group that really wants to be part of something and that's and that's what inflation is doing, and that's what the basement is doing, really does rent our community in our country by shifting wealth to asset owners, people who own homes and people who don't who just have wages. So I know that that's not exactly an upbeat message, but that's what you and I and Andy are trying to do, is to get people involved, you know, in the right economy that can garner value through this inflationary debasement period and basically pull yourself out of this so you're not chasing meme coins all day.
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Jen Senassi
Mark, as always, it's been a pleasure. Thanks so much for joining Markets Daily today.
- [19:25]
Mark Connors
Thank you, Jen. A pleasure always.
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Jen Senassi
And thank you to our audience who watches day in and day out. If you enjoy Markets Daily, subscribe to the Coindesk podcast network that is available on all podcast platforms. And if you prefer to watch, subscribe.
- [19:38]
Mark Connors
To our YouTube channel.
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Jen Senassi
Give us a thumbs up. Thanks so much for coming on this journey with me and participating in the Markets Daily community. We hope you have a great day and we'll see you tomorrow.