"Prediction markets deepen information asymmetry... a small number of 'elite traders' take most of the profits"

An analysis has emerged that, in decentralized prediction markets, a flow in which a small number of information-advantaged traders structurally absorb retail investors' losses is strengthening.

On the 9th (local time), crypto media Cointelegraph reported that crypto asset analytics firm 10x Research "diagnosed that in prediction markets, ordinary participants tend to prioritize 'immediate rewards' over accuracy" and "a small number of elite traders with accurate probability estimation and hedging strategies are continuously capturing market inefficiencies."

The report explained that "most users move in ways similar to sports betting, with narratives and dopamine-seeking dominating trading." By contrast, professional traders exploiting information asymmetry are, the analysis said, taking profits over the long term through probability pricing and capturing spreads. According to on-chain data, about 83% of Polymarket user wallets recorded losses, while only 16.7% of wallets made profits.

Some accounts' excessively high win rates have raised suspicions of insider information use. The 'pony-pony' account, which bet on events related to AI company OpenAI and recorded realized gains of more than $77,000, maintains a 100% win rate. The 'AlphaRaccoon' account, which earned more than $1,000,000 in a single day on a Google search trends-related event, also fueled controversy.

The media said, "Although prediction markets are seeing increased liquidity as the proportion of retail investors entering recently has grown, the 'elite-trader-centered structure' based on information gaps is strengthening."