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What is Polymarket? A Guide to Decentralized Prediction Markets

FinCrypt Staff

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What is Polymarket? A Guide to Decentralized Prediction Markets

Prediction markets like Polymarket are becoming increasingly popular due to the perception of greater transparency compared to traditional gambling.

This article will explore how the Polymarket prediction market works, including how to use it and whether or not it is a safe place to store and trade funds.

What are prediction markets?

Prediction markets are online, peer-to-peer betting platforms that allow people to trade stocks tied to the outcome of a future event. Similar to a traditional betting platform, users can place bets on sporting events, political events, and more. However, instead of simply placing a bet, they purchase stocks that fluctuate in value based on the current market sentiment regarding the outcome of the event.

For example, users might bet that Candidate X will win a political election. The stock would typically start trading at $0.50, indicating a 50/50 chance of success or failure. It can be sold at any price, as long as the market has liquidity to sell it. If Candidate X wins, the stock will be worth $1.00, and if he loses, the price drops to $0.00.

These markets often accept cryptocurrencies in exchange for stocks.

What is Polymarket? Polymarket explained

Polymarket is a prediction market hosted on the Ethereum blockchain. Users can buy stocks using USD Coin (USDC).

Polymarket | Home

So what is Polymarket for?

Polymarket Overview

Polymarket offers trading on US political outcomes, cryptocurrency prices, sports, world politics, and other aspects of trending and breaking news.

Market fluctuations when betting can cause impermanent losswhere the staked funds are consumed by the needs of the market the user is contributing to.

Main features of Polymarket

Polymarket bills itself as a decentralized prediction market. Of course, true decentralization is hard to come by, and the Polymarket team controls many different aspects of the platform, including bidding, market creation, maintenance, and other decision-making.

Despite not being fully decentralized, it is often seen as a fairer and more transparent way of speculating on future events, compared to the more opaque systems used in traditional gambling, where odds are set by bookmakers at will.

How does Polymarket work?

The platform uses user-provided liquidity pools to facilitate trading, and similarly, event share prices are set based on real-time trading activity and market assessments by the community. Smart contracts are used to automate aspects of exchange activities.

The CLOB (centralized limit order book) enables on-chain and non-custodial trade settlement, while in the background, off-chain matchmaking services are also in action, making the system hybrid-decentralized.

While online documentation claims that Polymarket does not charge trading fees, this appears to be a semantic statement and in practice the platform charges a net 2% on trading earnings.

Benefits of using Polymarket

Polymarket is seen as more transparent than other betting platforms due to its use of smart contracts and blockchain technology. Users have much more insight into how their share prices are calculated compared to simply placing a bet at a bookmaker.

Similarly, stocks are programmed to pay out when certain conditions are met and reported in the news, and this programmatic system of guaranteed payouts is perceived as slightly more reliable than traditional gambling.

There is generally a wider range of events open for trading on Polymarket compared to traditional betting platforms, leveling the playing field for certain analysts with different types of expertise and interests.

Finally, users have the opportunity to trade stocks while remaining somewhat agnostic as to the actual outcome of a future event, a feature not typically supported in traditional gambling.

Potential risks and challenges

Polymarket is not without its own unique risks and challenges. First, users may find that making money by providing liquidity is easier said than done, and in fact, it may be seen as a higher-risk endeavor than simply buying stocks. Providing liquidity and profiting from it should be viewed as something advanced.

The value of staked assets can fluctuate dramatically, leaving liquidity providers with worthless or reduced value assets.

Of course, another risk is simply losing money by betting on the incorrect outcome of a market. The Polymarket community is known for being analytical and methodical compared to the typical betting site, making the competition quite fierce for unsuspecting newbies.

There is also, as always in DeFi, the risk of the platform itself failing or falling victim to some sort of hack, exploit, or bad action by the team or external forces.

Is Polymarket legit?

There is no strong evidence to make an assessment about the legitimacy of Polymarket one way or the other. No widely publicized scandals have tarnished the platform’s reputation so far.

TrustPilot reviews have some reports from users who felt that certain markets they traded on were settled unfairly or inaccurately, but there is no concrete evidence that this is the case at this time.

Polymarket Review: Introduction to Polymarket

To get started with Polymarket, you will need to register an account and deposit some USDC, which can be purchased with fiat or cryptocurrency on most major cryptocurrency exchanges.

First, create an account by signing up with your name and email address. The platform does not require you to provide an ID or go through a KYC verification at this point.

Navigate to your profile and go to Wallet, then Deposit to make a deposit of USDC. Once this is complete, you’ll be ready to buy and sell shares at upcoming events!

You can navigate the Polymarket interface by filtering markets based on category.

polymarket

Polymarket | Markets

Currently, the markets menu includes markets on the Middle East, pop culture, cryptocurrencies, politics, sports and science.

You can also browse by New, Trending, Liquid, and Ending Soon.

New markets may be more favourably priced in some cases, as fewer people will have placed their bets and the outcome will be somewhat uncertain. On the other hand, markets that are ending soon will likely have a fairly well-determined outcome. In some cases, shares will already be locked in at around $0.99, indicating a 99% probability of a particular outcome.

These markets will be difficult to trade profitably unless you believe that the 1% outcome is correct. However, sometimes a market that is ending soon will have a healthier margin that you can still work with. Markets that are ending soon also lock up your assets for a shorter period of time than a new market, some of which can take months to resolve.

Markets with high liquidity are generally preferred, as buying stocks in a low liquidity market can cause price slippage, meaning you are losing some of your funds on the trade.

How to Trade and Stay Safe on Polymarket

The Polymarket platform can attract new users by having so many different events to buy stocks on. New users are generally advised to take a methodical and evidence-based approach to predicting the outcome of any event.

Successful Polymarket traders often work with a lot of historical data and build models to predict the likelihood of an event, rather than simply buying stocks based on intuition. Of course, swing trading is also possible, where users don’t aim to see a market through to the end, but rather to take profits before the market ends.

As with any type of financial speculation, it is important to have a risk management plan and well-established entry and exit points in place to achieve long-term profitability, as well as thoroughly research and test any trading strategy before using real funds.

You can learn more about risk management here.

Disclosure: This article does not constitute investment advice. The content and materials presented on this page are for educational purposes only.

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We are the editorial team of FinCrypt, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on FinCrypt, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

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Markets

Crypto Markets Rebound as Spot Bitcoin ETFs Attract Massive Inflows

FinCrypt Staff

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Crypto Markets Rebound Ahead of Early Ethereum ETF Approval

This week saw $722 million worth of Bitcoin spot ETF inflows, including the largest daily inflow in a month.

Cryptocurrency markets rallied on Wednesday, driven by inflows into spot Bitcoin exchange-traded funds (ETFs).

The price of Bitcoin (BTC) is up 3% over the past 24 hours to last change hands at $65,200, according to CoinGecko. Ethereum (ETH) is up 2% and is trading at $3,471. Solana (SUN) and Polkadot (POINT) increased by 4%.

Bitcoin spot ETFs saw $422 million in daily inflows on Tuesday, the highest in the past 30 days, according to Far side data, . The all-time record for a single day was $1.05 billion on March 12.

Among Tuesday’s top contributors, BlackRock’s IBIT led with $260 million in inflows, followed by Fidelity’s FBTC with $61 million. This week has already seen more than $722 million in inflows.

Among the top 100 cryptocurrencies by market cap, Worldcoin (WLD) led with a 28% increase, followed by Helium (HNT) with 20% and Lido DAO (LDO) with 15%.

Worldcoin, a decentralized identity project led by OpenAI CEO Sam Altman, announced is extending the lockups for early investors and team members. This means that tokens will be gradually released through 2029, instead of the original 2027 plan. Token unlocks are generally seen as a negative because they increase supply and early investors can sell their tokens for profit.

Meanwhile, XRP, the token of the XRP Ledger network, jumped 8% after the CME and CF benchmarks introduced new indices and reference rates for XRP.

U.S. stocks faced a downturn on Wednesday. The S&P 500 fell 1%, while the Nasdaq Composite and Dow Jones Industrial Average both fell 2%.

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Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days

FinCrypt Staff

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Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days

Crypto markets appear to have been taken over by the bulls as major tokens have surged above their crucial resistance zone. Bitcoin surged above $65,000 while Ethereum was above $3,500, and XRP, which had remained passive for quite some time, surged over 40% in the past few days to hit $0.6. The uptrend has been captured in most altcoins, with Worldcoin (WLD), Arweave (AR), and Injective (INJ) leading the rally. Here’s what to expect for these tokens in the coming days.

Worldcoin (WLD) Price Analysis

O Worldcoin Price has been trading inside a descending wedge since it marked a new ATH near $12 in the final days of Q1 2024. The recent price action helped the price break out of the upper resistance of the wedge, breaking above the crucial resistance zone between $2.21 and $2.39. Market sentiments have changed, but technicals suggest that the bulls may remain passive for a while, which could offer some room for a bearish pullback.

The price broke out of the wedge with a significant increase in volume, but the current volume suggests that the bulls have taken a step back. Meanwhile, the RSI is about to reach the upper boundary, which could attract bearish forces. Additionally, the DMI has undergone a bullish crossover, but the decline in the ADX suggests that the rally may remain consolidated above the gains. Therefore, the WLD price is expected to maintain a horizontal consolidation between $3 and $3.3 and trigger a fresh rally to $4.4 during the next bullish rally.

Arweave (AR) Price Analysis

Arweave formed a strong base around $25, which helped the rally trigger a recovery during the bearish attack. Mt. Gox and German terror forced the price to fall below $20. However, the recent price action has brought the altcoin within the bullish range and raised expectations of maintaining a decent uptrend for a few more days.

AR price has hit one of the major resistances around $30 to $31.5, which could act as a strong base once overcome. The buying volume is slowly increasing, which could keep the bullish hopes for the rally high. Moreover, the supertrend has just flashed a buy signal, indicating a clean reversal of the trend. Therefore, AR price seems primed to maintain a healthy uptrend and rally above $40. However, if the bulls maintain a similar trend, making new highs above $50 may not be a tedious task for the bulls.

Price Analysis of Injective (INJ)

Injective price has been showing sharp strength since the beginning of the year and hence, the recent turnaround is expected to revive a good uptrend going forward. The bears engulfed the rally to a large extent, but the recent price action suggests that the bulls have regained their dominance. Therefore, INJ price is expected to maintain a strong uptrend with a bearish interference on the way down.

INJ price has surged above the lower support zone and has registered consecutive bullish candles. Although the volume is below the required levels, the OBV is maintaining a sharp uptrend. Furthermore, the Ichimoku cloud lead span B is heading towards the lead span A and a healthy crossover indicates the start of a new uptrend. However, INJ price may be out of the bears’ reach once it secures the resistance zone between $30.77 and $32.12, which seems to be on the horizon.

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Ethereum at $3.5K, Exchange Supply Hits 34-Month High

FinCrypt Staff

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Ethereum at $3.5K, Exchange Supply Hits 34-Month High

Ethereum (ETH) supply on exchanges has hit a 34-month high as the asset’s price surpassed the $3,500 mark.

ETH has risen 2.3% over the past 24 hours and is trading at $3,490 at the time of writing. The second-largest cryptocurrency — with a market cap of $419 billion — briefly touched an intraday high of $3,517 earlier today.

ETH Price, Whale Activity, RSI, and Exchange Supply – July 17 | Source: Santiment

Ethereum’s daily trading volume also increased by 7.6% to reach $19.8 billion.

According to data provided by Santiment, the supply of Ethereum on exchanges has reached $19.52 million ETH. This level was last seen in September 2021, when the asset was trading around the same price.

On the other hand, data from the market intelligence platform shows that the number of whale transactions has fallen by 12% in the last day — falling from 8,730 to 7,629 unique transactions per day.

The move shows that the supply of Ethereum on exchanges has been increasing with small deposits rather than large transactions from whales.

Additionally, the ETH Relative Strength Index (RSI) is currently hovering at the 60-mark, per Santiment. The indicator shows that Ethereum is slightly overbought at this price point, but it may not be in a critical position due to its large market cap.

One of the main drivers of Ethereum price increase is ETH spot expectations ETFs in the US Investment products are scheduled to start trading on July 23rd.

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Bits + Beeps: How to Play the ‘Trump Trade’ in Cryptocurrencies After the Assassination Attempt

FinCrypt Staff

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Bits + Bips: How to Play the ‘Trump Trade’ in Crypto After the Assassination Attempt

Also, how much will the Fed cut rates (and when)? What will be the inflows into ETH ETFs? And what is the near future for Bitcoin?

Posted on July 17, 2024 at 12:00 PM EST.

Listen to the episode at Apple Podcasts, Spotify, Capsules, Source, Podcast Addict, Pocket molds, Amazon Musicor on your favorite podcast platform.

In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger and Joe McCann, joined by guest Jack Platts, dive into the market reaction to the recent assassination attempt on former President Donald Trump, analyzing how this event will influence the 2024 US presidential election and the cryptocurrency markets.

They also cover potential rate cuts: Could there be a cut in July? How big could the September rate cut be? Could the decision be influenced by the upcoming election?

They also give their predictions on what percentage of BTC ETF inflows the ETH ETFs will reach, and James talks about what he expects for Grayscale’s ETHE (hint: his outlook would be positive for ETH).

Finally, they delve into what’s next for Bitcoin as the German government runs out of BTC and Mt. Gox distributions begin. Just now?

Program Highlights:

  • Whether Trump’s shooting decided the election and whether the event caused a “flight to safety”
  • How election markets are becoming a place to watch election probabilities and whether cryptocurrencies “lean right”
  • Whether rate cuts will occur in July or September and by how much they will cut: 25 bps or 50 bps
  • How Joe sees the relationship between global liquidity cycles, rate cuts, and the potential rise of Bitcoin
  • What are the new updates about Ethereum ETFs and their expected launch?
  • Why Solana Hasn’t Performed Significantly Better Since Trump News
  • What Market Breadth Indicates About the Current Market Rally and the Impact of Rates on Small Caps
  • Everyone’s predictions on ETH ETF inflows and how much outflow we’ll see on Grayscale’s ETHE
  • What’s Next for BTC After German Government Exits Bitcoin and Mt. Gox Giveaways Starting This Week

Hosts:

Guest:

  • Jack PlattsCo-Founder and Managing Partner of Hypersphere Ventures

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