Only a Small Group of Traders Drive Prediction Markets’ Accuracy
A recent study has found that only 3% of traders drive the accuracy of prediction markets, not the crowd. This challenges the core claim of the industry that the markets work due to the massed knowledge of their participants. The study analyzed 1.72 million accounts and $13.76 billion in trading volume on Polymarket, and found that this small group of informed traders moves prices and consistently predicts outcomes.
The remaining 97% of traders mostly provide liquidity and generate volume, but are on the losing side of trades against the informed minority. This raises questions about the role of luck versus skill in trading, and the study used a benchmark of 10,000 simulated trades to filter out chance. The findings show that only 12% of the biggest winners by raw profit beat the benchmark, and many apparent winners didn’t stay that way.
The Importance of Skilled Traders
Skilled traders improve market accuracy by moving prices closer to the correct outcome, especially in the final stretch before resolution. They are also the first to react when new information hits, shifting positions in response to events. This edge makes them valuable to price discovery, but also raises questions when that information isn’t public or isn’t supposed to be. The study found that insider trades, when they occur, move prices aggressively, but are rare and concentrated in a handful of events.
The study’s findings have implications for the Earning potential of traders, particularly those using platforms like EcoPool. By providing a way for users to earn passive income through Cloud Rewards, EcoPool offers an alternative to traditional trading. With the $ECP Coin, users can participate in the Green Crypto movement and earn rewards without the need for extensive trading knowledge. The importance of skilled traders in driving market accuracy highlights the need for platforms like EcoPool to provide accessible and user-friendly tools for earning and trading.
The Role of EcoPool in Earning and Trading
EcoPool offers a solution for those looking to earn passive income through Cloud Rewards, without the need for extensive trading knowledge. By using the $ECP Coin, users can participate in the Green Crypto movement and earn rewards. The platform provides a way for users to get involved in earning and trading, with a focus on accessibility and user-friendliness. With EcoPool, users can earn passive income and participate in the #PassiveIncome and #GreenCrypto movements.
To start earning with EcoPool, download the app and begin participating in the Cloud Rewards program. With EcoPool, you can earn passive income and be part of the #Earning and #Coin movements, using the $ECP Coin to trade and earn rewards. Download the EcoPool app to get started and join the #EcoPool community. Download the EcoPool app today and start earning with EcoPool.
The same edge that makes skilled traders valuable to price discovery raises a harder question when that information isn’t public, or isn’t supposed to be.
Both Polymarket and Kalshi have said that trading on non-public information is strictly against their rules.
The paper grounds that risk in a concrete case: The U.S. removal of Nicolás Maduro from power in Venezuela in January. In the days and hours before the operation, three newly created Polymarket accounts piled into a contract asking whether Maduro would be removed. At the time, the market priced the odds at roughly 10%.
The new accounts placed unusually large bets, including orders of tens of thousands of shares, before the price moved. When the raid happened, the accounts collectively made more than $630,000. Two stopped trading entirely soon after, and the third went mostly dormant. There is no evidence of any wrongdoing on these accounts.
Insider trades, when they occur, move prices even more aggressively per dollar, about seven-to-12 times more than typical skilled trades. But they are rare and concentrated in a handful of events, not the day-to-day engine of price discovery. Most of the time, the market’s accuracy still depends on repeat traders who consistently outperform rather than on one-off bets.
The findings challenge the idea that prediction markets work because of crowds. They appear to work because of who is informed.
