Prediction markets have seen three phases of bettors: early traders, live traders, and the second winds. These traders bet at different times and reveal much about how prediction markets can be used even if important attributes about their customers are unknown.
It’s easy to see the waves in action. For example, Polymarket’s VP debate market had about $225,000 in trading volume on the morning of the debate. After the debate, it had almost $822,000, a 360% increase. Six days later when the market’s outcome was still unclear, trading volume rose to over $1.7 million, more than double post-debate volume.
The same three waves were noticeable in PredictIt’s 2020 presidential election market:
PredictIt’s 2020 presidential election markets opened in September 2017, but October 2020 through the end of the election is comparable to the pattern Kalshi will likely experience in the 2024 cycle.
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Date Range
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Avg. Daily Contracts Traded
|
|---|---|
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Oct. 1 to Nov. 2
|
454,129
|
|
Nov. 3 to Nov. 7
|
809,563
|
|
Nov. 8 to Dec. 18
|
109,432
|
The big trades are yet to come
The trades leading up to the election include standard traders or people who may wish to flip their contracts before the election is called. But the Election Day and Election Night bets are the big ones.
In 2020, PredictIt had already seen a large uptick in contracts traded before Election Day. PredictIt users traded about 220,000 contracts on Nov. 1 to about 720,000 on Nov. 3. The day after Election Day, PredictIt users traded 1.9 million contracts.
The day after Election Day was the high point of trading. From Nov. 5 until Nov. 7 when the election was called for Joe Biden, PredictIt users traded between 450,000 and 500,000 contracts each day.
Trading didn’t stop after the election’s outcome was known, but it dropped precipitously. Prediction markets are based on an event that proves the contract has been settled one way or the other. PredictIt’s 2024 presidential market will be settled based on the Electoral College votes cast in December. So, there will be time between knowing the president and the market’s settlement.
Kalshi has a larger audience, higher trading limits, and more aggressive marketing than PredictIt. Election Day will be a major event, but Election Night will be even larger. Once the elections have been called, Kalshi will still have activity before its settlement criteria are met by its third-party sources.
What’ll be really interesting to see is the magnitude of trades that take place on Kalshi today and the days after the election.
