Blockchain-based prediction markets are attracting more speculators as traders seek returns that exceed merely holding spot cryptocurrencies, according to a recent report.
Prediction markets are emerging as a new speculative space for traders, contrasting casual retail participants with data-driven, professional traders, resulting in “extreme information asymmetry and meaningful arbitrage windows,” according to a Monday report from crypto research firm 10X Research.
While sports betting constitutes the majority of activity on these platforms, Bitcoin (BTC) and crypto-related event outcomes are presenting more niche opportunities that digital asset traders can’t overlook, according to 10X.
“It serves as a helpful reminder that nearly every significant crypto trading venue managed its own market-making or ‘treasury’ desk, not only to provide liquidity but to counter retail flow, and seldom at a loss,” the company stated.
Related: BTC set for December recovery on ‘macro tailwinds’, Fed rate cut: Coinbase
For quantitative traders, prediction markets can provide asymmetric payoffs that compare favorably with the potential upside on underlying spot tokens, the report indicated.
For example, traders on decentralized prediction market Polymarket are betting on whether the BNB (BNB) token will reach $1,500 by Dec. 31. “Yes” shares on that market recently traded around $0.01, suggesting a potential 100x payout if the event occurs. In contrast, a spot BNB holder would experience approximately a 1.65x gain if the token ascended to the same level from its current price.
Related: BitMine acquires $199M in Ether as smart money traders bet on ETH decline
High win-rate accounts, AI bots raise insider trading concerns
Nevertheless, some prediction market accounts are showing troubling signs of insider trading, particularly a newly emerged account that earned over $1 million in a single day by betting on Google search trends.
Polymarket user AlphaRaccoon generated $1 million by successfully winning 22 out of 23 placed bets, according to crypto investor Haeju.
“This isn’t a coincidence. He previously made over $150K predicting the early launch of Gemini 3.0 before results were publicly available,” he indicated in a Thursday X post.
Others are using artificial intelligence bots to enhance their chances of winning.
Polymarket user “ilovecircle” earned over $2.2 million in the last two months, with a 74% win rate across bets involving politics, sports, and cryptocurrency.
The user’s volume and winning consistency “almost assures” that it is employing a machine learning (ML) model for “cross-niche arbitrage and auto trading,” stated prediction market trader Archive, in a Sunday X post.
Magazine: Train AI agents to make better predictions… for token rewards
