Since its launch, Polymarket has seen a surge in trading volume, particularly during major events like the 2024 election. However, a CNBC analysis indicates that around 70% of closed markets on Polymarket had reported volumes below $10,000, with fewer than 10% exceeding $100,000.
This low volume is concerning for traders, as it can lead to significant price fluctuations and increased trading costs due to wider spreads. Experts like Constantin Bürgi and Eric Zitzewitz emphasize that thin markets can be volatile and less appealing for seasoned traders, who prefer higher volume for capital efficiency.
Additionally, over 80% of the volume in these low-volume markets is attributed to bots, which can skew the trading dynamics. While some researchers argue that thin markets can still provide accurate predictions, the consensus is that higher volume markets tend to offer more reliable probabilities.
Despite the prevalence of shallow markets, experts like Harry Crane suggest that they do not render prediction markets economically useless, but traders must remain vigilant about the associated risks. As the prediction market landscape evolves, understanding the implications of trading volume will be crucial for investors