Prediction Markets Emerge As Speculative ‘arbitrage Arena’ For...
Prediction markets offer traders more upside than holding the underlying spot crypto, but AI bots and accounts with a 100% win rate raise suspicions of insider trading.
Blockchain-based prediction markets are drawing in more speculators as traders look for returns that surpass simply holding spot cryptocurrencies, according to a new report.
Prediction markets are emerging as a new speculative arena for traders, pitting casual retail participants against data-driven, professional traders, creating “extreme information asymmetry and meaningful arbitrage windows,” according to a Monday report from crypto research company 10X Research.
While sports bets account for the lion’s share of activity on these platforms, Bitcoin (BTC) and crypto-outcome related events are presenting more niche opportunities that digital asset traders can’t ignore, according to 10X.
“It is a valuable reminder that nearly every major crypto trading venue operated its own market-making or ‘treasury’ desk, not just to provide liquidity, but to stand on the other side of retail flow, and rarely at a loss,” the company wrote.
Related: BTC poised for December recovery on ‘macro tailwinds,' Fed rate cut: Coinbase
For quantitative traders, prediction markets can offer asymmetric payoffs that compare favorably with the upside on underlying spot tokens, the report suggested.
For instance, traders on decentralized prediction market Polymarket are betting on whether the BNB (BNB) token will hit $1,500 by Dec. 31. “Yes” shares on that market recently traded around $0.01, implying a potential 100x payout if the event happens. By comparison, a spot BNB holder would see a roughly 1.65x gain if the token climbed to the same level from current prices.
Related: BitMine buys $199M in Ether as smart money traders bet on ETH decline
However, some prediction market accounts are showing concerning signs of insider trading, particularly a newly emerged account that made over $1 million in a single day by betting on Google search trends.
Source: CoinTelegraph
