A week ago, it was reported that Polymarket, a prediction market protocol, recently reached a valuation of $9 billion after a major investment of $2 billion.
Interestingly, data and analysis show that surprisingly few users achieve consistent profits.
To rank in the top 0.51% in P&L, an individual must realize a profit of more than $1,000. Similarly, trading volumes above $50,000 should place you in the top 1.74% of the same metric. Also, by performing just 50 or more transactions, users will rank higher than 77% of the entire user base.
Two strategies to generate profits
A strategy called “endgame sweep” is currently attracting attention. When the outcome of an event is almost certain and the market price is high (e.g. above 0.95), some users will buy and wait for settlement to capture the remaining value.
The reason this works is that many small traders get nervous or impatient and end up selling contracts at prices like 0.997 or 0.999 just before the event settles down. This leaves room for small profits as large whale investors and robots can buy these cheap contracts and collect their full amount instantly. In some cases, these large companies spread fear or manipulate prices to scare small traders into selling early.
Related: Polymarket adds Bitcoin deposits as platform aims for $1 billion valuation
Another notable arbitrage opportunity occurs in multiple outcome prediction markets where the sum of the implied probabilities of all outcomes is less than 100%. In this scenario, the arbitrageur can buy a position with any possible outcome, and one outcome is certain to occur, so this strategy ensures a risk-free profit from market mispricing.
From prediction market to high-speed trading floor
People are starting to see Polymarket less as a simple betting place and more as a sophisticated trading venue where professionals profit from small price differences and perfect timing.
The strategy used is similar to that in DeFi, which relies on discovering temporary imbalances in buy and sell orders and executing trades first, faster than anyone else.
But for everyday users, this is a problem. This means you will often lose out to automated bots and high-speed trading systems, and even a second of slowness can make a big difference, especially in fast-moving markets.
Related: Polymarket uses Chainlink to deliver near-instant market results
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