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Cryptocurrency News Articles
Polymarket Whales Aren't Evidence of Prediction Market Manipulation
Oct 22, 2024 at 02:06 am
If you think the Trump bulls are wrong, bet against them. By Aubrey Strobel.
Accusations of prediction market manipulation have surfaced following former President Donald Trump’s odds rallying on Polymarket, with some suggesting that a single anonymous entity has made large bets to make a Trump victory appear more likely.
However, these claims are largely unfounded, as there is no evidence to suggest that the large bets are anything other than traders expressing their belief that Trump is underpriced.
In fact, the presence of a large buyer is actually a sign that the market is functioning efficiently, as it allows those who have the strongest conviction to express their views in the most impactful way.
Moreover, even if the trader was attempting to manipulate the market, it’s unclear how this would benefit Trump. It might cause complacency among his voters, reducing their turnout on Election Day (or even galvanize Harris supporters to show up at the polls).
Second, you could simply spend that $30 million on ads in battleground states and meaningfully influence the race. Polymarket remains as of yet a fairly obscure platform so any PR dividend from moving the odds slightly would be extremely hard to quantify.
Plus, as Polymarket itself noted in a detailed blog post Monday rebutting the manipulation claims, "if any user has any reason to believe that trades are being made for anything other than financial reasons, it is easy to adjust the odds to account for this" by excluding the whales' bets
The market is never “wrong.” It simply reflects all available information. If you correctly disagree with the market, you can be rewarded for that belief, by betting yourself.
U.S. users have alternatives to Polymarket, which is barred from serving them under a regulatory settlement. If you believe the Polymarket whale a) has meaningfully pushed up the price of the Trump contract, and b) is wrong, you can simply bet against him or her or them by going long on Harris.
Even though it’s not risk-free – Harris still needs to win for your bet to pay off – if you thought her “real” odds were 55%, you would be buying something worth 55 cents for 40 cents today. Even if you might not be willing to do that, other market participants will.
So if the Polymarket whale is indeed misinformed, now that we know there’s a (potentially misinformed) whale, you would expect the odds to decline as traders incorporate this new information.
Unless of course, the prediction markets are generally reliable and the whale hasn’t influenced them much.
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