Prediction markets are often promoted as a smarter way to forecast real-world events, but a new analysis suggests the odds may be stacked heavily against everyday users. According to market analyst DANNY, as much as 99% of retail traders could be losing out due to structural advantages enjoyed by insiders with better data, faster news access, and deeper pockets.
In a report shared through independent research channels, DANNY argues that platforms like Polymarket have changed dramatically as they’ve grown. Weekly trading volumes now reach into the billions, and that scale has transformed prediction markets from niche forecasting tools into highly competitive arenas dominated by data-rich players.
At the heart of the issue is information asymmetry. Many prediction contracts are resolved based on official announcements, breaking news, or specific data releases. Traders who receive this information even minutes earlier than the public can act first, locking in profits while slower participants are left chasing price moves.
DANNY points to the example of a trader known as “Alpha Raccoon,” who reportedly made more than $1 million by leveraging Google search trend data. While the strategy itself sounds simple, the analyst suggests the consistency and timing of the trades raise questions. Without early or superior data access, replicating such performance would be extremely difficult for the average user.
Volume, often seen as a sign of market confidence, is another major red flag. Large spikes in trading activity can make an outcome appear almost guaranteed, pushing retail traders to follow the crowd. However, the report highlights research from Columbia University published in 2024, which found that up to 60% of volume-based signals in prediction markets were misleading. In many cases, the activity was driven by strategies designed to shape perception rather than reflect genuine belief.
The analyst also warns about wash trading and artificial liquidity. Previous studies have suggested that a significant portion of Polymarket’s volume—up to 25% in some cases—may be wash-traded, making it harder for users to tell real demand from noise.
For retail participants, the report offers several cautionary steps. Traders are encouraged to carefully read contract terms and understand exactly which data sources determine outcomes and when those data points are released. Entering a trade without knowing this timing can mean buying in after insiders have already positioned themselves.
DANNY also advises looking beyond headline volume numbers. Sudden volume surges, unusual wallet activity, or tightly coordinated trades can be warning signs of manipulation. Watching how and when trades occur may reveal more than raw totals.
Finally, the report highlights behavioral traps. Many users fall into herd behavior, assuming the market “knows something.” Instead, the analyst urges traders to independently verify information and treat each trade as a strategic game against opponents who may be far better informed.
As prediction markets continue to grow, the analysis suggests one thing is clear: without caution, most retail traders risk becoming little more than exit liquidity for insiders.
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