Viewpoint: Prediction markets exhibit "extreme information asymmetry and obvious arbitrage opportunities"

Odaily Planet Daily News: According to monitoring by 10X Research, blockchain-based prediction markets are attracting more speculators who are seeking returns beyond simply holding spot cryptocurrencies. Prediction markets are becoming a new arena for speculation, leading to “extreme information asymmetry and distinct arbitrage windows” between retail traders and professional data-driven traders. The report points out that for quantitative traders, prediction markets can offer asymmetric returns that are more advantageous compared to the upside potential of spot tokens. For example, on the decentralized prediction market Polymarket, the “Yes” shares for whether BNB token will reach $1,500 by December 31, 2025, once traded at around $0.01, which means if the event occurs, there is a potential 100x return. However, the high win rates of some prediction market accounts have raised concerns about insider trading. Polymarket user AlphaRaccoon once earned over $1 million in a single day by betting on Google search trends, successfully winning 22 out of 23 bets. In addition, Polymarket user ilovecircle has made over $2.2 million in the past two months, maintaining a 74% win rate by betting across politics, sports, and crypto, and is speculated to be using machine learning models for cross-domain arbitrage and automated trading.