Prediction markets like Polymarket and Kalshi are becoming an increasingly significant source of information for investors. Their main advantage is obvious: participants don't just express an opinion, they bet their own money on a specific outcome. For this reason, the price of a contract can be interpreted as the market's estimate of the probability of an event.
On Kalshi, for example, a YES contract priced at $0.65 indicates an approximate 65% probability of the event occurring. However, this is not a "pure probability": it is influenced by liquidity, spreads, fees, capital constraints, and differences in information among participants.
This is where an important question arises: if Polymarket or Kalshi show a high probability of a certain event, does it mean that the bitcoin market or other digital asset markets will follow this signal? No, and the reason is that prediction markets and crypto markets solve different problems. The former assesses the probability of a specific event, while the latter directly allocates capital and forms the price of an asset.
Betting on an Event is Not the Same as Betting on an Asset
Suppose the probability of an interest rate cut by the Federal Reserve sharply increased on Polymarket. For a crypto investor, this is indeed important information, as an easing of monetary policy can support risk assets. However, there are several intermediate steps between anticipating the Fed's decision and buying bitcoin.
Investors may have already priced this decision in. Futures positions could have been opened in advance, options could reflect the corresponding risk distribution, and major players could simultaneously be reducing or increasing spot positions. Therefore, a new signal from Polymarket can serve as another way to measure an already existing market expectation.
Prediction markets reflect what participants consider likely. Crypto markets show what participants have already done with their money.
The latter is especially important because the price of a crypto asset is formed not only by expectations but also by the size of positions, leverage, liquidity, and the need to close existing trades. A Coinbase Institutional research report from July 2026 showed a simultaneous decrease in open interest for perpetual futures, term futures, and options alongside rising trading volumes. Coinbase interpreted this as risk being taken off participants' balance sheets, not just a change in sentiment.
Why Money Already Invested Carries More Weight
Imagine a situation where 70% of prediction market participants consider a certain event very likely. This is a strong signal, but by no means a strong trading signal for bitcoin.
First, the amount of money behind this opinion may be incomparable to the capital already present in the crypto market. Second, a Polymarket participant might bet on the event solely for the return from a change in probability, without buying bitcoin at all. Third, a professional crypto trader might agree with the event forecast and sell bitcoin if they believe the event is already priced in.
In other words, a correct event forecast does not guarantee the corresponding asset price.
For example, Polymarket offers contracts on the change in bitcoin price over 15 minutes, where participants bet on whether the price will be above or below the starting level at the end of the given interval. Such markets are directly tied to BTC's short-term dynamics and use Chainlink data to calculate the outcome.
Some January contracts had volumes in the hundreds of thousands of dollars. But such a market cannot automatically be taken as a full-fledged indicator of bitcoin's medium-term direction. It answers an extremely narrow question about what happens to the price over a specific short interval.
Prediction Markets Are Useful Precisely as Additional Information
The above does not mean that Polymarket and Kalshi are useless. On the contrary, research shows that prediction markets can indeed effectively aggregate information. In an experiment with over 2,400 participants and 261 events, prediction market prices were more accurate than a simple average of participants' forecasts.
Often, prediction markets outperformed traditional polls. For example, a study of US presidential elections showed that market-based forecasts were closer to the final result in 74% of cases when compared to 964 polls. But this is data for political elections, not proof that Polymarket can predict bitcoin returns.
Moreover, a study of 292 million trades across 327,000 binary contracts on Kalshi and Polymarket revealed that the calibration of probabilities depends on the event category, time horizon, trade size, and the specific platform. This means the contract price cannot be taken as an objective probability.
