Author: Frank, PANews
Previously, PANews conducted in-depth research on prediction market strategies, with one key finding being: the biggest obstacle to many arbitrage strategies may not be the mathematical formulas, but rather the depth of liquidity in the prediction market itself.
Recently, after Polymarket announced the launch of the U.S. real estate prediction market, this phenomenon seems to have become more apparent. After its launch, the daily trading volume of this series was only a few hundred dollars, far from the expected buzz. The actual market heat is much lower than the discussion heat on social media. This seems both absurd and反常, so it may be necessary to conduct a comprehensive investigation into the liquidity of prediction markets to reveal several truths about liquidity in prediction markets.
PANews extracted historical data from 295,000 markets on Polymarket to date and obtained the following results.
1. Short-Term Markets: A PVP Battlefield Comparable to MEME Coins
Among the 295,000 markets, 67,700 have a cycle of less than 1 day, accounting for 22.9%, and 198,000 have a cycle of less than 7 days, accounting for 67.7%.
Among these ultra-short-term prediction events, 21,848 are currently active markets, of which 13,800 have a 24-hour trading volume of 0, accounting for approximately 63.16%. This means that on Polymarket, a large number of short-term markets are currently in a state of no liquidity.
Does this state seem familiar?
During the peak of MEME coin mania, tens of thousands of MEME coins were also issued on the Solana chain, and the vast majority of these tokens similarly went unnoticed or died shortly after launch.
Currently, this state is being replicated in prediction markets, except that compared to MEME coins, the event lifecycle in prediction markets is predetermined, whereas the lifecycle of a MEME coin is unknown.
In terms of liquidity, more than half of these short-term events have less than $100 in liquidity.
In terms of categories, these short-term markets are almost dominated by sports and crypto market predictions. The main reason is that the judgment mechanisms for these events are relatively simple and mature, usually involving questions like whether a certain token will rise or fall in 15 minutes or whether a certain team will win. However, possibly because the liquidity is too poor compared to crypto derivatives, the crypto category is not the most popular "king of short-term."
Sports events absolutely dominate. Analysis shows that the average trading volume for sports events with a prediction cycle of less than 1 day on Polymarket reaches $1.32 million, while for crypto it is only $44,000. This also means that if you hope to profit by predicting short-term cryptocurrency trends in prediction markets, there may not be enough liquidity to support it.
2. Long-Term Markets: The Sedimentation Pool for Big Money
Compared to the numerous short-term event contracts, the number of markets with longer time cycles is much smaller.
On Polymarket, the number of markets with a 1~7 day cycle is 141,000, while markets longer than 30 days are only 28,700. However, these long-term markets have accumulated the most capital. The average liquidity for markets longer than 30 days is $450,000, while for markets under 1 day it is only around $10,000. This also indicates that large funds prefer to position themselves in long-term predictions rather than participate in short-term gambling.
In long-term markets (greater than 30 days), apart from sports, other categories show higher average trading volume and average liquidity. The category most favored by capital is U.S. politics. The average trading volume for such markets reaches $28.17 million, with average liquidity of $811,000. The "Other" category also performs well in attracting capital sedimentation, with average liquidity reaching $420,000 (the "Other" category here covers topics like pop culture, social issues, etc.).
In the field of crypto market predictions, capital also leans towards long-termism, such as predicting "Will BTC break through $150,000 by the end of the year?" or whether a certain token's price will fall below a certain level within a few months. In prediction markets, crypto predictions are more like a simple option hedging tool rather than a short-term speculation tool.
3. The Polarization of Sports Markets
Sports predictions are currently one of the main contributors to Polymarket's daily active users, with currently 8,698 active markets, about 40%. However, looking at the distribution of their trading volume, sports markets of different cycles show huge disparities. On one hand, the average trading volume for ultra-short-term predictions (less than 1 day) reaches $1.32 million. On the other hand, the average trading volume for mid-term markets (7~30 days) is only $400,000, while the average trading volume for ultra-long-term markets (greater than 30 days) is as high as $16.59 million.
From this data, it appears that users participating in sports predictions on Polymarket either seek "instant results" or are making "season-long gambles." Mid-term event contracts are反而 not very popular.
4. Real Estate Prediction Launch Faces "Adaptation Difficulties"
After analyzing a large amount of data, a surface-level result shows that prediction events with longer durations seem to have better liquidity. But sometimes, when this logic is applied to specific or more细分 categories, this characteristic fails. For example, the real estate prediction mentioned earlier, which is a market with relatively high certainty and a time cycle greater than 30 days. In contrast, predictions like the outcome of the 2028 U.S. election lead the entire market in both liquidity and trading volume.
This perhaps reflects the "cold start困境" that new asset categories (especially niche, professionally demanding categories) might face. Unlike simple and intuitive event predictions, participants in the real estate market require higher professionalism and认知. Currently, the market seems to be in a "strategy磨合期" where retail participation enthusiasm remains at the spectator level. Of course, the天然 low volatility of the real estate market also exacerbates this cold start nature. The lack of frequent event-driven volatility also reduces the passion of speculative funds. Under these combined factors, these relatively niche markets face the尴尬 situation where professional players have no counterparties, and amateur players dare not enter.
5. "Short-Term" or "Sedimentation"?
Based on the above analysis, we can reclassify the different categories in prediction markets. Categories like cryptocurrency and sports, which are ultra-short-term, can be called short-term markets. Categories like politics, geopolitics, and technology are more偏向于 long-term sedimentation markets.
Behind these two types of markets are different investor groups. Short-term markets are显然 more suitable for people with small capital or those who need higher capital turnover rates. "Sedimentation" markets are more suitable for people with large amounts of capital and相对 higher certainty.
However, when markets are划分 based on trading amount, we see that markets with capital sedimentation capability (greater than $10 million) account for 47% of the total trading volume, even though their contract count is the smallest, only 505. Markets with trading volumes between $1,000 and $100,000 constitute the vast majority in terms of数量, with a total of 156,000 contracts, but their trading volume is only 7.54%. For the vast majority of prediction contracts that lack top-tier narrative ability, "listing即归零" is the norm. Liquidity is not evenly distributed sunlight, but rather a spotlight汇聚 around a very few super events.
6. The "Geopolitics" Sector is Rising
The ratio of "Current Active Number / Historical Number" can indicate the growth momentum of a category. Currently, the sector with the highest growth efficiency is undoubtedly "Geopolitics." The historical total number of event contracts for geopolitics is only 2,873, but there are currently 854 active, with an active ratio as high as 29.7%, the highest among all sectors.
This data indicates that the number of new contracts in the "Geopolitics" category is rapidly increasing, making it one of the topics prediction market users are most concerned about currently. This can also be glimpsed from the recent frequent exposure of insider addresses related to several "Geopolitics" contracts.
Overall, behind the liquidity analysis of prediction markets, whether it's the sports sector as a "high-frequency casino" or the political sector as a "macro hedge," the core of their ability to capture liquidity lies in either instant dopamine feedback or deep macro博弈 space. Those "chicken rib" markets that lack narrative density, have overly long feedback cycles, and lack volatility are注定难以 to survive in the decentralized order book.
For participants, Polymarket is evolving from a "predict everything" utopia into an extremely professional financial tool. Recognizing this is more important than blindly searching for the next "100x prediction." In this track, value is only discovered where liquidity is abundant; where liquidity dries up, there are only traps.
This is perhaps the biggest truth the data tells us about prediction markets.
