According to a recent report, as traders seek to go beyond simply holding spot cryptocurrencies for returns, blockchain-based prediction markets are attracting an increasing number of speculators.
The crypto research firm 10X Research noted in a report released on Monday that prediction markets are emerging as a new type of trading venue for traders, where ordinary retail participants face off against data-driven professional traders, creating "extreme information asymmetry and significant arbitrage opportunities."
10X pointed out that while sports betting accounts for the majority of activity on these platforms, the outcomes of Bitcoin (BTC) and cryptocurrency-related events are providing more professional opportunities that digital asset traders cannot ignore.
"This reminds us that almost every major crypto exchange operates its own market-making or 'funding' trading desk, not only to provide liquidity but also to stand on the opposite side of retail fund flows, and they almost never lose," the company stated in the report.
The report indicates that for quantitative traders, prediction markets can offer more attractive asymmetric returns than the underlying spot tokens.
For example, traders on the decentralized prediction market Polymarket are betting on whether the BNB token will reach $1500 before December 31. The "yes" option on this market recently traded at around $0.01, meaning that if the event comes true, the potential return could be up to 100 times. In contrast, if the token rises from its current price to the same level, spot BNB holders would only see about 1.65 times the return.
However, some prediction market accounts are showing concerning signs of insider trading, particularly a newly emerged account that earned over $1 million in a single day by betting on Google search trends.
Crypto investor Haeju pointed out that Polymarket user AlphaRaccoon made $1 million by winning 22 out of 23 bets.
"This is by no means a lucky streak. He previously predicted the early release of the Gemini 3.0 results before they were announced, earning over $150,000," he wrote in a post on the X platform on Thursday.
Others are leveraging AI bots to improve their chances of winning.
Polymarket user "ilovecircle" has achieved a 74% win rate over the past two months through bets covering politics, sports, and cryptocurrencies, earning over $2.2 million.
Prediction market trader Archive stated in a post on the X platform on Sunday that the user's trading volume and stable win rate "almost certainly" indicate that they are using machine learning models for "cross-domain arbitrage and automated trading."
Related: Analysts say Bitcoin (BTC) bulls must hold key levels to avoid dropping to $76,000
Original article: “Prediction Markets Rise as Speculative ‘Arbitrage Arena’ for Crypto Traders”
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