Forecast markets expose retail sector to structural disadvantage, analyst warns.

• Information asymmetry dominates forecasting markets.
• Artificial volume can lead to flawed decisions.
• Real-time data benefits professional traders.

A market analyst known as DANNY stated that up to 99% of retail investors operate at a clear disadvantage in prediction markets, as these platforms increasingly favor participants with access to real-time news and advanced data tools. This assessment comes at a time of strong growth in the sector, with weekly volumes already reaching billions of dollars.

Platforms like Polymarket have ceased to be environments where careful interpretation of probabilities offered a competitive advantage. With the expansion of liquidity, performance has become dominated by traders who receive information before the general public or use external signals to anticipate results defined by official announcements and public statements.

The central point raised by Danny is the asymmetry of information. Many forecast contracts are settled based on specific news, which creates a structural advantage for those who have early access to this data. For the retail investor, entry often occurs when the main movement has already been priced in.

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The report cites the example of a trader identified as “Alpha Raccoon,” who reportedly amassed over $1 million using Google Trends data to anticipate outcomes. The analyst noted that “the probability of accurately predicting such outcomes without early access to the data is low,” suggesting that diverse sources of information play a crucial role.

Another factor highlighted is the strategic use of volume. In prediction markets, large volumes can create the perception of consensus, leading other participants to follow the flow. A 2024 study by Columbia University, mentioned in the analysis, indicated that up to 60% of volume-based signals were misleading, created to influence market perception rather than reflecting genuine conviction.

Furthermore, the research pointed to evidence of fictitious trading on Polymarket, with estimates suggesting that up to 25% of the volume may not represent genuine activity. This scenario increases the risk for less experienced traders, who tend to over-rely on aggregate metrics.

DANNY recommends that users carefully evaluate the data sources defined in the contracts, the timing of trades, and atypical volume spikes. Observing portfolio patterns and order times can offer more reliable signals than the total volume displayed.

The analyst also highlighted the impact of herd bias. Many participants enter positions based on apparent trends, without verifying the logic behind the prices. In increasingly sophisticated forecasting markets, the combination of collective behavior and unequal information has shaped an environment where retail investors often act as the ultimate counterpart to better-prepared traders.