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If you’ve clicked on this article, you’re probably well aware cryptocurrency – the crown jewel being Bitcoin – is a digital asset class with a typically young-ish male userbase.
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If you weren’t aware of that, now you are. And you are likely, but may not be aware, that Bitcoin prices have tanked YTD, with all gains in BTC that started when Trump entered office (again) early last year have now been erased.
I’ve already written this week that we’re in another ‘crypto winter,’ and that precious metals trades sucked a lot of energy out of the room.
More or less unregulated (though not untaxed), open 24/7, and (in)famous for large intraday volatility swings, cryptocurrency – mostly Bitcoin – has long been adored for those very qualities. But in a world where you can see the same kind of rapid gains at less than a tenth of the cost of a bitcoin, by buying a bar of gold (or gold-linked ETF or stock), well. You can see where I’m going.
But that write-up of mine failed to consider something I brought up in this week’s HotCopper Wire podcast alongside Market Link editor Isaac McIntyre: There’s a new kind of digital investment product that has come to the fore in the last few years, and the industry isn’t slowing down.
On top of everything else acting as a headwind for BTC, this new product is also snatching away all the young men, which I think is being overlooked.
Welcome to prediction markets
Prediction markets are actually what they sound like: Websites where you can place a bet on pretty much anything. They have exploded in popularity over the last twelve months, obviously spurred by the vibe shift that came with Trump 2.0 (read: less government interest when it comes to regulation.)
The Australian gov’t has been paying attention. In fact, the biggest prediction market site, Polymarket, is already banned in Australia. Typical Canberra.
The issue is Polymarket did not have a licence to offer betting products in Australia, and the website was taken down; blocked by Federal Court order. Except now Polymarket has a new domain, and there’s also now a second website called Polymarket Analytics, and at the time of writing, it’s accessible in Australia.
That’s neither here nor there, but the company’s unwillingness to comply, the domain shifting, the encouragement of workarounds – it gives you a feel for this particular predictions company, and it’s the exact kind of loosely guarded gambling environment that draws those with the thirst.
That’s also to say nothing of competitor website Kalshi, which you can just straight up access and trade on now in Australia if you really want to. (They’re not sponsoring this article or anything, I’m just letting you know).
That’s a screenshot of the most popular bet on Kalshi at the time of writing, which happens to be a sports bet around the American Super Bowl (something that will be familiar to Australian readers).
So we’ve got bets which are effectively cryptocurrency derivatives, we’ve got sports betting – prediction market websites you could look at as an “everything app” from a gambling point of view. And that’s causing all the controversy that you’d expect, as well as generating all the enthusiasm you’d expect. Especially among winners.
That’s the basic rundown on what these products are and what they offer, and it’s also pretty likely that any attempts (from the U.S.) to regulate them will be low-priority, probably for the foreseeable future, at least.
Which could mean further doldrums for Bitcoin.
But hey, now we have crypto derivatives to trade. The market’s evolving.
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