‘elite’ Traders Hunt Dopamine-seeking Retail On Prediction Markets:...

Rising retail participation incentivizes data-driven, “elite” traders to use “information asymmetry” and spreads caused by casual investors seeking a quick buck, 10x said.

Prediction markets are emerging as a new battleground in the crypto economy, where the best-informed traders are competing against casual retail bettors for profits.

Most users are behaving more like sports bettors than disciplined traders, according to a Tuesday report from research firm 10x Research, which said they are trading “dopamine and narrative for discipline and edge.” It added: “Accuracy and profit are driven not by the crowd, but by a tiny, informed elite who price probability, hedge exposure, and extract premium from retail-driven longshots.”

The rising liquidity and retail participation are incentivizing professional trading desks to increase their prediction market activity and capture the spread and “misinformation asymmetry” arising from this market structure, 10x said.

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The report is a concerning sign for casual traders looking to make easy money on prediction markets, as blockchain data suggests that most users lose their initial investment.

Only about 16.7% of wallets on Polymarket are in profit, while the remaining 83% have incurred losses, according to blockchain data from Dune.

Related: Prediction markets emerge as speculative ‘arbitrage arena’ for crypto traders

The flawless track record of some prediction market accounts is stoking concerns about possible insider trading, as certain users appear to win every time.

Polymarket user pony-pony boasts a 100% win rate with over $77,000 in realized profit by betting on events related to the artificial intelligence development company, OpenAI, prediction market data aggregator Polymarket Money said in a Monday X post.

Source: CoinTelegraph