"Users continue to flock"...Virtual asset-based prediction market, 90% suffer losses

▲ Prediction market, Bitcoin (BTC)/AI generated image

The virtual asset-based prediction market is experiencing an unprecedented boom. However, analysis results show that the vast majority of users are incurring significant losses.

On May 4 (local time), BeInCrypto cited a Wall Street Journal (WSJ) report, stating, "An analysis of transaction data from users of leading prediction market platforms Polymarket and Kalshi revealed that approximately 90% of users are recording negative returns." Prediction markets operate on a structure where users bet on the occurrence of specific events. While transaction volumes have surged recently in conjunction with major political events, a clear polarization phenomenon has emerged where profits are concentrated among a small number of experts.

The survey results showed that most Polymarket users hold balances less than their principal, with median losses amounting to hundreds of dollars. Conversely, more than half of the total profits are monopolized by large accounts, representing less than 1% of users. This suggests that professional traders using sophisticated algorithms are absorbing funds from individual investors. Kalshi also shows a similar pattern, with users' capital continuously being eroded by a small number of those with an information advantage.

Thin liquidity and wide spreads were cited as major hurdles for prediction markets. The high costs incurred when users place or close bets make it very difficult to generate long-term profits. Experts warned that while prediction markets are gaining attention as a tool for aggregating collective intelligence, they pose high risks akin to gambling for ordinary people. The regulatory authority, the Commodity Futures Trading Commission (CFTC), is also closely monitoring their speculative nature and deficiencies in investor protection.

Within the virtual asset ecosystem, doubts about the health of prediction markets are also growing. Concerns about market manipulation have been raised as funds are directed more towards political propaganda or sensational topics rather than price predictions for major assets like Bitcoin (BTC) or Ethereum (ETH). While platforms have stated their intention to implement measures for user protection, the prevailing view is that these efforts are insufficient to bridge the information gap with professional traders.

For the growth of prediction markets not to remain a mirage, transparent operations and the creation of a fair trading environment must come first. Users should clearly recognize the asymmetric structure of the market and approach it cautiously, rather than being lured by high returns. If the current structure, which starkly divides into a few winners and many losers, is not improved, the sustainability of prediction markets will inevitably be threatened.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*