Rising retail participation incentivizes data-driven, “elite” traders to use “information asymmetry” and spreads caused by casual investors seeking a quick buck, 10x said.
Prediction markets are emerging as a new battleground in the crypto economy, where the best-informed traders are competing against casual retail bettors for profits.
Most users are behaving more like sports bettors than disciplined traders, according to a Tuesday report from research firm 10x Research, which said they are trading “dopamine and narrative for discipline and edge.” It added: “Accuracy and profit are driven not by the crowd, but by a tiny, informed elite who price probability, hedge exposure, and extract premium from retail-driven longshots.”
The rising liquidity and retail participation are incentivizing professional trading desks to increase their prediction market activity and capture the spread and “misinformation asymmetry” arising from this market structure, 10x said.
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