Eastern Standard Time, late November 2024, the personnel struggle surrounding the next Federal Reserve Chair is rapidly heating up in both on-chain prediction markets and traditional betting platforms. As the trading volume of related contracts on platforms like Polymarket and Kalshi surges, market participants begin to price the probability of “who will lead the Federal Reserve” with real money, marking a shift towards a more granular financialization and on-chain representation of macro expectations.

Prediction Market Betting Landscape: Brainard Holds the Advantage

● News Driven:
- After mid-November, contracts on Polymarket regarding “the next Federal Reserve Chair” saw a significant increase in trading volume, with daily transaction amounts rising from the hundreds of thousands to the millions, indicating that this event has become the focal point of on-chain capital speculation.
- Among mainstream contracts, Lael Brainard's winning probability was traded at one point in the 60%–70% range, significantly higher than other candidates, positioning her as the “market consensus top choice.”
- The current Chair Jerome Powell's reappointment contract was significantly discounted by the market, with trading prices lingering around 20%–30%, reflecting a more aggressive bet by on-chain participants on a “change of leadership.”

● Market Structure:
- The contract structure primarily consists of binary options (Yes/No), where the price directly corresponds to the market's implied probability; for example, a Brainard contract price of $0.65 represents a market pricing of a 65% winning probability.
- Some platforms employ a “Winner-takes-all multi-choice pool” design, where multiple candidates share the same liquidity pool, with the winning contract settling at $1 and the rest clearing to zero, significantly enhancing the expected differentiation brought by odds disparities.
- Regulated platforms like Kalshi package such personnel contracts as “event contracts” under the CFTC regulatory framework, imposing strict limits on maximum positions and single-account risks, making them closer to a restricted version of futures trading.

● Capital Participation Profile:
- On-chain capital data shows that a single large player can have a net exposure of up to hundreds of thousands of dollars in contracts related to the Federal Reserve Chair, indicating that mid-to-large funds are willing to take directional risks for macro judgments.
- In contrast, while traditional betting sites have considerable total betting amounts, the incremental funds appear more retail-oriented based on comparisons of on-chain and exchange traffic, with average bet sizes significantly lower than those of DeFi native users.

TradFi Betting VS On-Chain Predictions: Divergence and Price Differences

● Odds Differentiation:
- On some offshore betting sites, the odds for Powell's reappointment were at one point significantly higher than the implied probabilities in the on-chain market, with betting odds suggesting about 40%–45% chances, while the corresponding probability on Polymarket remained below 30% for an extended period.
- For Brainard, the on-chain market generally offered a 60%+ high probability, while early betting odds were more in the slightly advantageous but not clearly leading range, leading to a significant price difference between the two sides.
- This misalignment of odds provides space for cross-market arbitrage, with some quantitative funds attempting to go long on Brainard on-chain while hedging opposite positions on betting platforms to lock in profits from probability convergence.

● Participant Group Differences:
- Traditional Betting: The user structure mainly consists of retail investors from political circles, news followers, and peripheral accounts of hedge funds, who have some understanding of macro data and interest rate paths but tend to make decisions based on emotions, influenced more by polls and headlines.
- On-Chain Predictions: Participants are more likely to come from crypto traders, quantitative teams, and DeFi veteran users, who are more sensitive to interest rate expectations, yield curves, and liquidity cycles, viewing such personnel contracts as a composite tool for “macro hedging + sentiment trading.”
- Under regulatory constraints, compliant platforms like Kalshi have also attracted some hedge funds and family offices to test the waters on a small scale, incorporating event contracts into their hedging baskets alongside interest rate swaps and treasury futures to jointly manage duration and directional risks.

● Information Reaction Speed:
- At key news nodes (such as reports on White House personnel trends, around FOMC meetings), there is a clear difference in the timing of price reactions between on-chain and betting markets, with on-chain often completing repricing within minutes, while betting platforms adjust more slowly.
- Research statistics show that during several significant personnel and macro events, price changes on Polymarket lead mainstream media headlines by tens of minutes to hours, demonstrating its property as an “information outpost.”

Data and Sentiment: How Interest Rate Expectations Embed in Prices

● Macro Data Linkage:
- Following the release of employment and inflation data, the price fluctuations of Brainard and Powell contracts in on-chain predictions were clearly synchronized with the implied path of federal funds rate futures. When the market revised down the expected number of rate cuts next year from 3 to 1–2, the prices of the more “dovish” candidates were relatively pressured.
- On the day of the CPI unexpectedly rising, market expectations for a “more hawkish, continuation of the current rate hike path” strengthened, leading to a short-term rebound in Powell contracts, with intraday price fluctuations reaching 10–15 percentage points.

● Sentiment and Narrative:
- KOLs and research institutions labeling candidates on social media—such as viewing Brainard as “more focused on employment and financial stability” and Powell as “inflation-first”—directly influenced retail investors' interpretations of odds and FOMO rhythms.
- When mainstream media introduced narratives suggesting “Wall Street prefers stability, leaning towards the incumbent,” Powell's odds on betting platforms briefly strengthened, but the on-chain market reacted more restrainedly, indicating that crypto capital places greater importance on policy combinations and Senate structures as hard factors.

The fluctuations in prediction contracts surrounding the Federal Reserve Chair are not isolated phenomena but are products resonating with macro liquidity cycles, interest rate expectations, and political structures. On-chain prediction markets have transformed the “probability scenarios” that originally existed only in institutional research reports into tradable assets, allowing participants with different risk preferences and information advantages to directly clash at the price level, while traditional betting platforms continue to serve as more emotional and populist expectation aggregators. The divergence between the two on the same event essentially prices “who will shape the next round of the global liquidity environment.”

Long and Short Game: What Betting on Brainard Means

● Optimistic/Supportive Side:
- Believing that Brainard's election will bring a more moderate rate hike path and a longer easing tail, beneficial for the valuation recovery of risk assets, which is a medium to long-term positive for both the U.S. stock and crypto markets.
- Bulls bet on her tendency to prioritize “financial stability,” expecting that during credit risk exposures, easing and liquidity support will be more decisive, thereby reducing extreme tail risks.
- For on-chain capital, Brainard's ascension is seen as a more favorable macro environment for high Beta assets, enhancing risk appetite for small to mid-cap tokens and high-growth sectors.

● Pessimistic/Opposing Side:
- Concerns that a more dovish leadership style may amplify medium to long-term inflation pressures, weakening the real returns on dollar assets, and subsequently putting pressure on long-term interest rates and credit spreads.
- Some institutions believe that frequently “backstopping” market sentiment will exacerbate asset bubbles, and once inflation resurfaces, the market shock from forced rapid tightening will be more severe.
- There are also views that overly relying on personnel changes to speculate on macro trends can easily overlook institutional checks and balances and the FOMC's collective decision-making mechanism, overestimating a single chair's dominance over the interest rate path.

Outlook: From Personnel Betting to Macro Infrastructure

In the short term, the market will continue to focus on the official nomination time from the White House, the Senate hearing rhythm, and key swing senator statements, with prediction markets quickly repricing with each shift in sentiment. In the medium term, if the contracts in this Federal Reserve Chair contest continue to see increased volume on-chain and compliant platforms, and demonstrate better predictive accuracy than polls and media afterward, event contracts are expected to evolve from “curiosity tools” into regular components of institutional asset allocation and risk hedging. In the longer term, prediction markets surrounding a series of macro events such as interest rate decisions, inflation ranges, and election results have the potential to complement traditional interest rate derivatives and treasury markets, becoming a high-frequency data source for observing global liquidity expectations and policy risks. This on-chain betting regarding “who will lead the Federal Reserve” may just be the beginning of this trend.

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