OKX Research: After the US elections, prediction markets will have to find new unique niches

The total value locked (TVL) of prediction markets has exceeded $133 million, which is almost 4 times more than at the beginning of the year. This was noted by analysts from OKX Research. The daily trading volume approached $12 million.

The largest prediction market remains Polymarket, a decentralized betting protocol based on the Polygon blockchain. The one-day open interest on Polymarket reached $90.59 million, up 1181% from the beginning of 2024. The average number of active monthly traders over the past three months (incomplete August) reached 38 thousand (+827%), and the average monthly trading volume was $248 million (+358% since the beginning of the year).

The US presidential election remains Polymarket’s largest market, with individual issue volumes exceeding $600 million. Election-related forecasts account for 97% of total volume. Other popular topics include the economy (e.g. Fed rate cut by $11.2 million, up 20% in 7 days), sports (Super Bowl by $8.2 million, up over 100% in 7 days), and politics (US state elections).

OKX Research analysts highlight several key issues inherent in prediction markets. In their opinion, the main problem here is liquidity. Even at peak periods, only the top 3 markets have sufficient volume for large trades. The all-or-nothing payout structure is more suitable for users with a gambling approach than for serious investors, since it is difficult to set stop-losses in prediction markets. High volatility and the risk of a complete loss scare off institutional investors. At the same time, for crypto investors with a “gambling mindset like a casino player”, prediction markets also do not look very attractive due to a longer feedback cycle and lower returns than in the spot and derivatives crypto markets.

To increase long-term engagement, prediction markets need to introduce exciting, unique themes that other markets don’t have. Right now, the bulk of the volume is focused on the presidential election. With the campaign in the US coming to an end, the challenge for platforms like Polymarket will be to maintain momentum in the post-election period.

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Vlad Krylov
journalist and crypto market expert