Crypto prediction markets are so hot right now everyone wants in on the party.

DYdX, one of the largest decentralised derivatives exchanges worldwide, is the latest player to jump into the space. But it has a twist — dYdX is letting investors lever up bets on the winner of the 2024 presidential election by as much as 20 times.

The offering, which hit the market late Thursday night, combines two of the riskiest wagers in the markets — predictions and trading with borrowed capital.

DYdX’s offering is supported by Polymarket data, which is available on an open-source basis.

The exchange, which caters to sophisticated traders, is a bit late to the Polymarket party. More than a half-dozen other crypto-powered prediction markets have already gone live this year.

Protocol solvency

With just $1,000, traders can take a $20,000 position and go long on Trump winning the election, said David Gogel, the dYdX Foundation’s head of strategy.

For a platform that offers 100 times leverage on other crypto trades, Gogel says this is a reasonable cap for a new market.

“We want to give people the tools they want to trade, but within some reason, without putting the overall protocol solvency at risk,” he said.

DYdX’s foray into the 2024 prediction game is a clear sign that Polymarket has opened up new revenue opportunities for crypto exchanges.

Backed by Peter Thiel, the billionaire investor and Donald Trump supporter, Polymarket’s election prediction pools sport more than $1.7 billion in bets on who will triumph on November 5.

Going mainstream

Polymarket is also rapidly going mainstream. Its markets are featured on Bloomberg’s Terminal platform for professional traders.

In July, Polymarket brought aboard polling whiz Nate Silver as an advisor. It has over 100,000 users across all markets, including weather events, basketball games, and monetary policy.

Given Polymarket’s liquidity, Gogel said the dYdX market uses it as its data provider, or oracle, to ensure the accuracy of the price in its election market. That, too, isn’t without its risks.

“There’s a heavy reliance on Polymarket data versus a large token like Bitcoin listed on multiple exchanges,” he said.

Other projects, including Solana-based Drift Labs, Speculate, and D8X, are also angling into the predictions markets. Coinbase Ventures has also invested in several prediction markets built on the Base blockchain, according to reporting from The Information.

Still, Gogel sees the new election market on dYdX as less of a competitor to Polymarket and instead as more of a tool for more advanced traders.

What is TRUMPWIN?

Its TRUMPWIN offering is a perpetual futures contract that lets traders bet on whether the Republican nominee and former president will win on November 5.

Perpetual futures are financial contracts to buy or sell an asset that never expires. They let traders bet long that the asset will continue to go up in price or bet short that the asset will go down in price in the future.

This kind of trading isn’t possible on Polymarket today.

Nuanced view

“With a perpetual exchange like dYdX, you can take a more tailored view of the market,” Gogel said.

“Even on Polymarket today, you have people that are trying to hedge their risks, but having a spot-only exchange just doesn’t allow for that new, more nuanced view on things.”

TRUMPWIN is an experiment, and Gogel says that trading activity here will dictate whether dYdX launches additional markets after the election.

That period after the November vote will also be a critical test for the niche.

With over 75% of Polymarket’s volumes occurring around the election, the question of prediction markets’ staying power after the election looms large.

“Do I think launching prediction markets or a TRUMPWIN market will get as much liquidity as Bitcoin or Ethereum? Probably not,” Gogel told DL News.

“But can it be a top 50 market on dYdX in terms of volume over a few weeks? Probably.”

Liam is a Berlin-based correspondent for DL News. Got a tip? Email him at liam@dlnews.com