Bankless: How has Polymarket performed since the US elections?

Author: David C, Bankless; Translated by: Wu Zhu, Jin Se Cai Jing

The 2024 U.S. election season has sparked a real frenzy in prediction markets, with Polymarket emerging as the undisputed center of betting activity. Bloomberg has integrated Polymarket into its terminal. Reports indicate that Trump's campaign team is actively monitoring Polymarket's odds in real-time. Throughout the year, the entire market has seen about $3.7 billion in election contract trading.

This success sparked a gold rush, with entrepreneurs and developers rushing to launch their own prediction market clone products, hoping to get a piece of the pie. However, despite the influx of new entrants like a tidal wave, none were able to achieve substantial breakthroughs in front of mainstream platforms.

At DefiLlama, the total locked value of the prediction market currently tracked by DefiLlama (TVL) is 162 million USD, with Polymarket still dominating, holding about 85% of the share. However, its total locked value (TVL) has declined from the peak during the election cycle. At that time, the number of daily active wallets reached 50,000, with daily trading volume exceeding 500,000 transactions, and on November 6 alone, the trading volume reached 350 million USD. In the face of such astonishing data, many observers questioned whether Polymarket could maintain this momentum after the voting concluded.

Now, six months have passed since the election, and Polymarket's development trajectory has broken through people's doubts, demonstrating resilience that lays the foundation for the next stage of development.

How has Polymarket performed since the election?

The year 2025 is approaching, and the shadow of the Augur prediction market platform looms over Polymarket. For those with short memories, Augur was once a shining star during the 2020 election, but faced a catastrophic collapse after the vote counting ended. With users fleeing in droves, Augur's total value in ETH plummeted by 20 times—from 19,000 ETH to 700 ETH. Worse yet, due to legal disputes and design flaws, market resolutions have been delayed repeatedly, leaving the few remaining users frustrated as they watched the platform exit.

But Polymarket has never encountered such an issue.

Polymarket did not stand by and watch its user base evaporate, but achieved something more impressive: a true transformation. Users initially attracted by predictions about Trump and Harris have steadily shifted their focus to Federal Reserve interest rate decisions, geopolitical conflicts, token price trends, and—perhaps most importantly—the sports betting market.

It is particularly noteworthy that the daily number of wallets that have never participated in the U.S. related market has sharply increased. These users now account for about a quarter of all active users on Polymarket—there has been a significant and healthy shift in the user structure, helping the platform maintain surprising stability despite a natural decrease in bettors focusing on the elections.

Other interesting data is as follows:

• The total number of users is roughly the same as when the election activities heated up in mid to late October last year.
• The number of monthly active traders as of April 1 is the same as in November of last year.

The trading volume has also shown a similar situation, maintaining a daily trading volume between 20 million and 30 million USD over the past three months. Although it has decreased since the peak, it is still roughly at the same level as in September last year.

What is the prediction accuracy of Polymarket?

In addition to maintaining its user base after the election, data scientist Alex McCullough's analysis indicates that Polymarket has recently gained attention for its prediction accuracy.

McCullough claims that Polymarket's accuracy is as high as 94%, which excludes bets that are almost certain (over 90% probability) or highly unlikely (less than 10% probability), as the outcomes of these bets are essentially clear but not yet officially announced. His findings (all recorded here) include:

• Market Overestimation of Event Probability: The platform sometimes overestimates the probability of events, which may be due to group bias, insufficient liquidity, or speculative risk preferences, raising doubts about its reliability.
• Most Accurate Sports Betting: The sports market is the fastest growing sector on the platform, becoming Polymarket's most stable predictive indicator due to balanced betting, clear standards, and nearly $4.5 billion in trading volume. This may distort the platform's overall predictive ability for other markets.
• Long-term predictions seem to be more accurate than reality: Long-term markets often include some results that clearly answer "no" as time goes on. In an interview with Polymarket, McCullough gave an example, such as "Will Gavin Newsom become president in 2024?" This market lasted for months, but ultimately became increasingly clear that this would not happen. These extreme cases make the overall accuracy of Polymarket appear better than it actually is, as these almost certain results are counted in the platform's prediction record.

Overall, Polymarket's continued activity indicates that it is not a flash in the pan, but its reliability as a predictive indicator warrants cautious optimism, awaiting further scrutiny.

Are these insights actionable?

Although we may need more analysis to truly validate the accuracy of Polymarket, McCullough's analysis reveals some interesting and actionable trends within these markets that anyone can leverage to improve their betting strategies. Here are some key points from his research that may inspire active users of Polymarket:

• Most markets end with "No". About three-quarters of the questions will be answered with "No". Keep this in mind when looking for opportunities in potentially undervalued "No" stocks.
• Best price to bet "no". Historical data shows that when the price of "yes" is between $0.20 and $0.50, the real opportunity is lower. Buying "no" shares at this time can yield the highest returns. This advantage diminishes, but it still exists until around $0.80.
• Prices close to the edge are reasonable. If the price of "yes" is below $0.10 or above $0.95, it is already close to the correct price. Once the fees are paid, any gains are minimal.
• Timing can give you an advantage.
• More than four hours before market close: "Yes" is usually overvalued → Buy "No".
• Last four hours: Prices are tightening and becoming accurate → Only buy now if you are optimistic about the "yes" direction.
• If you hold "No", please consider selling before the last hour - the price may rebound at the last moment.
• The data from the sports market may vary.
• The day before the competition: The accuracy rate is about 66%. This is a good time to buy "no".
• After the competition starts: Accuracy rises, reaching about 94% after two hours.
• Prices usually fluctuate every 30 minutes (30, 60, 90, 120 minutes), which means these times may be good opportunities for adjustments or bets.
• Traders prefer to bet on "yes." Traders like to bet on upcoming events, follow the hype, and the market can be relatively quiet. Placing limit orders cautiously can help you avoid paying excessively high fees.