Original | Odaily Planet Daily (@OdailyChina)

Author｜Azuma (@azuma_eth)

Earlier this year, Odaily Planet Daily translated an article by data analyst arise titled "Data Modeling: How to Enhance the Interaction Quality of Polymarket?".

The core logic of the article is that considering around 80% of users have received at least a $1 Polymarket liquidity (LP) subsidy, while everyone is frantically increasing trading volume, a more efficient interaction strategy is to find ways to accumulate LP rewards.

The so-called "LP rewards" are cash subsidies issued by Polymarket to improve the liquidity of its platform for certain prediction markets, and all reward situations can be viewed in real-time on the official Rewards page (https://polymarket.com/rewards).

Users need to first select events from the subsidies, then place orders of at least the specified amount (Min Shares) within a specified price range (Max Spread) to automatically accumulate LP rewards. The closer the hanging order price is to the market price, the higher the efficiency of obtaining rewards. LP rewards are issued once daily at 8:00 AM, but will only issue rewards above $1.

Although the rules for obtaining LP rewards are not complicated, the natural difficulty of market-making in prediction markets is higher (refer to "Only 10% of prediction markets survive to the end of the year, which is not alarmist"), combined with the $1 minimum limit for daily rewards, many ordinary users with limited funds find it not easy to accumulate rewards when trying to operate, and may even encounter financial losses due to being trapped in inventory risks.

However, right now, Polymarket is offering an excellent opportunity window— with the arrival of NCAA "March Madness," Polymarket has announced a $2 million LP subsidy for the relevant events.

It should be noted that so far, the total LP subsidies issued by Polymarket for all subsidized events is only $13 million, and this time more than $2 million in subsidies will be concentrated in specific 63 matches within less than a month— this directly means an expansion of the subsidy intensity for individual events, and also means an excellent opportunity for ordinary users.

Next, Odaily Planet Daily will take you step by step through the process of market-making in NCAA-related events, and suggest a few points that I personally think are worth noting.

First, open the Rewards page of Polymarket, and after clicking on Rewards, you can sort all events by the subsidy intensity. It is not difficult to see that the events with the highest subsidy intensity on Polymarket are all NCAA "March Madness" matches. (I have been providing liquidity on Polymarket for the past few months and have never seen such a level of subsidy intensity.)

The next most important thing is to choose the pool. It should be added that there is a COMP (Competitive) column on the right side of Rewards indicating the current competitive situation for providing liquidity in that event, and theoretically, the greener it is, the better (indicating less competition), but in practice, the competition gap has basically been equalized by professional market-making funds, so what you will see is mostly "three yellow bars," meaning the current competitive situation is "medium."

It is more advisable to choose matches that start later, for example, I decided to place my funds in the match between Iowa University and the University of Houston on March 19 (Eastern Time, March 20 Beijing Time).

The reason why it's better to have a later start time is that the peak trading volume for single sports events on Polymarket often comes just before the matches start, while Polymarket has now begun to implement subsidy inputs. Taking the upcoming match between Iowa University and the University of Houston as an example, the current total trading volume is only $12,000, and with a certain liquidity base, lower trading volumes often mean smaller fluctuations— the chart below clearly shows the probability fluctuation status on Polymarket after this match was listed, and you are not mistaken, it is a straight line!

A minimal fluctuation means that users can temporarily avoid the "inventory risk," a significant risk source for market-making. In other words, you don’t have to worry too much about sudden one-sided price fluctuations causing your one-sided orders to be filled, and the market price deviating unfavorably.

After selecting the pool (it doesn’t have to be this one; I placed my orders in the morning, and you can keep pushing the time forward), it's now time to invest liquidity. Polymarket requires a minimum of 1,000 shares for all NCAA matches, with a maximum price spread of ±1¢.

Compared to placing buy orders, it is more advisable to use Polymarket's Split feature to break out equal bilateral shares from $1,000 (minimum requirement) (which can be reverse-minted back to $1,000 using the Merge feature), and then place sell orders on both sides.

As for the specific order points, it depends on your own risk preference. The closer to the market price, the higher the efficiency of earning LP rewards, but considering inventory risk, I prefer to place orders at the "market two" position, and pay attention to price fluctuations, trying to ensure not to be filled — if filled, the order amount will no longer meet the requirements, and you will need to consider how to handle the other side's shares.

Finally, about the order withdrawal timing, I suggest withdrawing your orders a day before the match starts, and then looking for later matches. If you're interested in continuing, you can repeat the above operation.

Finally, here's the data: I placed the orders around 10:00 AM, during which the probability of that match did not show any fluctuations. Although I was supposed to monitor it, I didn't do much operation. By 5:00 PM, the LP rewards I had accumulated were $4.31 (which will be issued tomorrow).

The profit is minimal, but the focus is on enriching Polymarket's interaction behavior. Compared to a few days ago, you might still need to engage with the market under relatively low subsidies, under the current subsidy intensity and event fluctuation conditions, this operation can be considered completely brainless.

Finally, a shout-out: if you are interested in prediction markets, feel free to join our TG chat channel for discussions: https://t.me/OdailySeer

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