Data suggests that many intertwined factors influencing prices, such as U.S. monetary policy expectations and supply surpluses, may be the reason for the weak correlation between election odds and Bitcoin prices.
Comparing the changes in Bitcoin prices and the three-day changes in Republican election odds from June 1 to August 15 reveals a lack of clear correlation between the two variables. According to FalconX, many changes could occur in the coming weeks.
Although popular opinion suggests a strong positive correlation between Bitcoin’s (BTC) recent price performance and Republican candidate Donald Trump’s odds in the U.S. presidential election, market data indicates otherwise.
Since Trump’s meeting with Bitcoin miners in mid-June, crypto market experts have linked the Republican candidate’s performance in betting markets to Bitcoin prices. This narrative was bolstered after Trump’s survival of an assassination attempt in July, and Bitcoin faced pressure earlier this month as Democratic candidate Kamala Harris re-emerged in betting markets.
However, FalconX’s analysis of the three-day changes in Bitcoin prices and Trump’s odds of winning the presidential election on Polymarket from June 1 to August 15 shows no clear trend or correlation between the two variables.
The chart indicates no obvious relation between changes in Republican odds and Bitcoin price movements (FalconX). The X-axis shows the three-day percentage changes in Bitcoin prices from June 1 to August 15, while the Y-axis shows the changes in Republican victory odds. Data was sampled every 12 hours.
Red dots represent a surge in Trump’s chances of entering the White House on Polymarket from June 29 to July 29. Blue dots represent the so-called Democratic momentum period. Gray dots represent the rest of the time from June 1 to August 15.
The dispersion of red dots suggests there’s no link between changes in Republican odds and Bitcoin price movements. The blue and gray dots exhibit similar patterns.
“Interestingly, throughout the entire analysis period from June 1 to August 15, 2024, there is no significant relationship between election odds and Bitcoin prices. One reason for this weak correlation might be the multiple intertwined factors influencing prices, such as the aforementioned U.S. monetary policy path, looming supply surplus concerns, etc.,” said David Lawant, Head of Research at FalconX, in an email to CoinDesk.
Some intertwined factors, such as heavy selling in Saxony and fears of a flood of supply from bankrupt exchange Mt. Gox creditors, have constrained Bitcoin’s upside potential since June, overshadowing changes in Republican odds.
Nevertheless, with Kamala Harris now catching up, the imminent election could become a major driver of Bitcoin prices.
“Of course, a lot could change before November 5. As we approach the election day, it will be very interesting to see if prediction market data reveals election news as a key driver of price behavior, or even the dominant force,” noted Lawant.