Deep Dive into 290,000 Market Data Points: 6 Truths About Polymarket Liquidity

Previously, PANews conducted in-depth research on prediction market strategies, and one important finding was that the biggest obstacle to the success of many arbitrage strategies might not be the mathematical formula of the strategy, but rather the liquidity depth of the prediction market itself. This phenomenon seems even more pronounced after Polymarket announced the launch of its US real estate prediction market. Since its launch, the daily trading volume of this series of markets has only been a few hundred dollars, completely lacking the expected excitement. Its actual market activity is far less than the discussion on social media. This seems ridiculous and abnormal, therefore, it may be necessary to conduct a comprehensive investigation into the liquidity of prediction markets to reveal several truths about liquidity in prediction markets. PANews retrieved historical data from 295,000 markets on Polymarket to date and obtained the following results. 1. Short-Term Markets: A PVP Battleground Comparable to MEME Coins Of the 295,000 markets, 67,700 have a cycle of less than 1 day, accounting for 22.9%, and 198,000 have a cycle of less than 7 days, accounting for 67.7%. Of these ultra-short-term prediction events, 21,848 are currently active markets, of which 13,800 have zero trading volume in the past 24 hours, accounting for approximately 63.16%. In other words, a large number of short-term markets on Polymarkert are currently illiquid. Does this situation seem familiar? During the peak of the MEME coin frenzy, tens of thousands of MEME coins were also issued on the Solana chain, and the vast majority of these tokens were similarly ignored or quickly disappeared. Currently, this situation is also being replicated in the prediction market, except that compared to MEME coin, the event lifecycle in the prediction market is certain, while the lifecycle of MEME coin is unknown. In terms of liquidity, more than half of these short-term events have a liquidity level of less than $100. In terms of categories, these short-term markets are almost entirely dominated by sports and crypto market predictions. The main reason is that the judgment mechanisms for these events are relatively simple and mature, usually involving questions like the price change of a token in 15 minutes or the victory of a certain team. However, perhaps because of the extremely poor liquidity compared to crypto derivatives, the crypto category is not the most popular "king of short-term trading." Sports events, on the other hand, hold absolute dominance. Analysis shows that on Polymarkert, the average trading volume for sports events with a prediction period of less than one day reaches $1.32 million, while crypto events only reach $44,000. This also means that if you hope to profit by predicting short-term cryptocurrency movements in prediction markets, there may not be enough liquidity to support it. 2. Long-Term Markets: A Pool for Large Funds Compared to the numerous event contracts in short-term markets, the number of markets with longer time horizons is much smaller. On Polymarkert, there are 141,000 markets with a time horizon of 1-7 days, while there are only 28,700 markets with a time horizon of more than 30 days. However, these long-term markets have accumulated the most funds. The average liquidity of markets with a time horizon of more than 30 days reaches $450,000, while the liquidity of markets with a time horizon of less than 1 day is only around $10,000. This also shows that large funds prefer to invest in long-term predictions rather than participate in short-term speculation. In long-term markets (more than 30 days), except for sports, other categories show higher average trading volume and average liquidity. The most popular market category for funds is the US political category, with an average trading volume of $28.17 million and an average liquidity of $811,000. The "Other" category also performs well in attracting funds, with an average liquidity of $420,000 (this category includes popular culture, social media topics, etc.). In the prediction field of the crypto market, funds tend to favor long-term predictions, such as whether BTC will break $150,000 by the end of the year or whether the price of a certain token will fall below a certain level within a few months. In the prediction market, crypto predictions are more like a simple options hedging tool than a short-term speculative tool.

3. Polarization of the Sports Market

Sports predictions are one of the main sources of daily active users on Polymarkert, currently numbering 8,698, approximately 40%. However, looking at the distribution of trading volume, there is a huge gap in the sports market across different timeframes. On the one hand, ultra-short-term predictions (less than 1 day) average $1.32 million in trading volume; on the other hand, medium-term (7-30 days) market averages only $400,000 in trading volume, while ultra-long-term (greater than 30 days) market averages a staggering $16.59 million in trading volume.

6. The "Geopolitics" sector is on the rise

The growth momentum of a category can be seen from the "Current Active Quantity / Historical Quantity" ratio. Currently, the sector with the highest growth efficiency is undoubtedly "Geopolitics." The total historical event contracts for geopolitics are only 2873, but there are currently 854 active contracts, representing a high active rate of 29.7%, the highest among all sectors.

This data indicates that the number of new contracts in the "Geopolitics" category is rapidly increasing, making it one of the most concerning topics for users in the current prediction market.

This can be glimpsed from the recent frequent leaks of insider addresses related to several "geopolitical" contracts. Overall, behind the liquidity analysis of prediction markets, whether it's the sports sector as a "high-frequency casino" or the political sector as a "macro hedging," their core ability to capture liquidity lies in either providing immediate dopamine feedback or offering deep macroeconomic game space. Those "white elephant" markets lacking narrative density, with excessively long feedback cycles and lacking volatility are destined to struggle to survive in decentralized order books. For participants, Polymarket is evolving from a "predict everything" utopia into a highly specialized financial tool. Recognizing this is more important than blindly searching for the next "100x prediction." In this arena, value is only discovered where liquidity is abundant; where liquidity is scarce, there are only traps. This may be the biggest truth that data tells us about prediction markets.