Brazil’s Superior Electoral Court confirmed Luiz Inácio Lula da Silva’s re-election on Oct. 26 after a runoff reversal that caught political betting markets, Brazilian equities, and crypto-linked derivatives off guard. Lula secured 51.79% of valid votes against 48.21% for Flávio Bolsonaro, a margin of roughly 4.4 million votes, despite trailing after the first round.
The outcome broke a pattern that had held since Brazil restored direct presidential elections in 1989: every candidate leading in the first round had gone on to win the runoff. It also exposed a sharp mismatch between pre-election market positioning and the final count. Shortly before the result became clear, Polymarket placed Lula’s implied probability of victory at just 18.5%, meaning traders holding winning “Yes” shares stood to receive more than five times their original outlay.
New accounts captured large Polymarket gains
Two newly created Polymarket accounts, identified by PolyBeats on Oct. 23 as Abkhauae and eventalpha26, made sizable wagers on Lula during the most closely contested phase of the campaign. Within three days of the electoral result, the accounts had generated a combined $1.77 million in profits, according to PolyBeats.
Neither account displayed any other trades on the platform. Abkhauae later changed its visible name to Abkha, while eventalpha26 withdrew funds and left the platform.
The concentration of profitable Lula wagers in accounts with no wider trading history is likely to draw scrutiny from prediction-market participants, though a successful trade alone does not establish why the positions were taken. Election markets can move quickly on polling, private political intelligence, public reporting, and changes in turnout expectations, often before those factors are reflected in conventional financial instruments.
PolyBeats also identified several accounts positioned for a Bolsonaro win. One, Votei14Voude22, recorded the market’s largest loss, exceeding $430,000. Before the runoff, the account had maintained a 100% win rate in comparable election prediction trades, according to the platform’s tracking data.
Brazilian assets had rallied on Bolsonaro expectations
Financial markets had already leaned toward a Bolsonaro victory before Sunday’s vote. Reuters data showed Brazilian equities rose nearly 7% between the first-round result and the eve of the runoff, while the real strengthened by almost 5% over the same period.
That pricing left local markets exposed when the result contradicted prevailing expectations. At the opening of trading on Oct. 26, Brazil’s benchmark Ibovespa index dropped 10%, activating a circuit breaker and halting trading for 30 minutes. It was the first such interruption on the exchange since March 2020.
Losses deepened after the market reopened, with the Ibovespa briefly down 17.34% before closing 13.88% lower. Reuters described the session as the index’s worst one-day decline since March 2020. The U.S. dollar rose 8.79% against the Brazilian real, underscoring how quickly traders repriced domestic political risk across both equities and currency markets.
The size of the move suggests that the runoff had become more than a routine election trade. Equity gains before the vote, combined with the real’s appreciation, indicated that markets had assigned substantial weight to a Bolsonaro win and the policy expectations attached to it.
Crypto-linked Brazil contract moved before traditional markets
Crypto-based and on-chain trading venues reacted even sooner than Brazil’s regular market hours allowed. A contract linked to the iShares MSCI Brazil ETF, known by the ticker EWZ, fell 27.22% over 24 hours on Hyperliquid, according to TradingBeats monitoring. The contract was deployed through Trade.xyz and provided a continuously traded instrument tied to Brazilian equity-market sentiment.
Across venues, liquidations connected to the contract reached $14.9167 million, TradingBeats reported. Long positions accounted for $14.7275 million of that total, showing that the liquidation wave overwhelmingly hit traders betting that Brazilian equities would rise.
The difference between the EWZ-linked contract’s 27.22% decline and the Ibovespa’s 13.88% cash-market close reflects the mechanics of leveraged derivatives as well as the timing of the shock. Perpetual and crypto-linked contracts can trade throughout weekends and overnight periods, allowing participants to react immediately to an election result. They can also fall more sharply when leveraged long positions are automatically closed.
By the morning of Oct. 27, the Brazil-focused contract had recorded about $100 million in trading volume and $32 million in open interest during the selloff, according to network data cited by TradingBeats. Open interest measures the value of outstanding derivative positions and can indicate how much risk remains active after a major price move.
Dip buying followed the liquidation cascade
The contract rebounded by just over 5% within five hours after its initial plunge. TradingBeats data showed the long-to-short ratio rose to about four-to-one after the first shock, indicating that many market participants moved to buy the decline rather than maintain bearish positions.
That rebound did not erase the scale of the earlier selloff, but it showed how rapidly 24-hour markets can move from a forced liquidation event into a contest between short sellers and traders seeking discounted exposure. In such conditions, price changes can be amplified by leverage, thin weekend liquidity, and automatic liquidation mechanisms.
The election also illustrates a practical challenge for participants in country-specific assets. Political developments are often finalized outside traditional exchange hours, while crypto-native derivatives, prediction markets, and tokenized products continue trading. By the time B3 and other conventional venues open, much of the initial repricing may already have occurred elsewhere.
Local platforms face an Oct. 30 filing deadline
The market disruption arrived as local exchanges face a regulatory deadline. According to comments attributed to exchange manager Sarandy in the supplied material, firms must submit required legal forms by Oct. 30 or fully shut down their operations.
No further detail was provided on the applicable rules, agency, or scope of the filing requirement. The deadline nevertheless adds an operational issue for Brazilian trading platforms during a week already marked by an election shock, sharp currency moves, and unusually heavy activity in derivatives tied to the country’s equity market.
See how event odds and liquidations shape trading decisions in volatile elections—explore this prediction markets guide next.
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