The prediction market is becoming a new battleground in the crypto economy, where the most informed traders are competing with ordinary retail bettors for profits.
A report released by research firm 10x Research on Tuesday pointed out that most users behave more like sports bettors rather than rigorous traders, substituting "dopamine and narratives for discipline and edge." The report further added, "Accuracy and profits do not come from the crowd, but are driven by a small group of informed elites who price probabilities, hedge risk exposure, and extract premiums from retail-driven long bets."
10x stated that the growing liquidity and retail participation are incentivizing professional trading teams to increase their activities in the prediction market to capture the price discrepancies and "information asymmetries" generated by this market structure.
For ordinary traders hoping to easily make money in prediction markets, this report is a concerning signal, as blockchain data indicates that most users have lost their initial investments.
According to blockchain data from Dune, only about 16.7% of wallets on Polymarket are in profit, while the remaining 83% are at a loss.
The flawless winning streak of certain prediction market accounts is raising concerns about potential insider trading, as some users seem to win every time.
Prediction market data aggregator Polymarket Money stated in a post on X on Monday that Polymarket user pony-pony achieved a 100% win rate by betting on events related to AI development company OpenAI, having realized over $77,000 in profits.
Another user, AlphaRaccoon, won 22 out of 23 bets related to Google search trends, earning over $1 million in a single day, which also sparked insider trading allegations.
Meanwhile, concerns about the reliability of Polymarket data on third-party data dashboards have arisen after Paradigm researchers discovered a bug that would double-count prediction market trading volume, as reported by Cointelegraph earlier on Tuesday.
Paradigm researcher Storm wrote in a post on X on Tuesday that this bug is inflating key trading volume metrics used to measure prediction market activity, including nominal trading volume (which counts the number of trading contracts) and cash flow trading volume (which measures the dollar value at the time of each trade).
However, the inflated trading volume on the data dashboard is due to misinterpretation of data rather than wash trading, which is a deceptive and illegal practice where entities buy and sell the same instrument to create a false appearance of market activity growth.
The newly discovered bug by Paradigm has been "validated" by several data dashboards, including AlliumLabs and DefiLlama, which are now updating their Polymarket dashboards to eliminate the double-counting errors.
Related: The Rise of Prediction Markets as a Speculative "Arbitrage Venue" for Cryptocurrency Traders
Original article: “Research Report Claims ‘Elite’ Traders Hunt Retail Bettors Chasing Dopamine in Prediction Markets”
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