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Uncovering insiders and alpha on Polymarket with AI

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Re: Uncovering insiders and alpha on Polymarket with AI

#41

Post by coldtea »

testaccount28 wrote: post #38
coldtea wrote: post #36

> Prediction markets have been called "truth machines" because anyone who has information missing from the market can profit. That sounds like "insider trading" machines, or "scam" machines, rather than truth machines.

yes, they allow you to pay people who have information about the future for that information, in a distributed manner. this is great if, like many people, you want information about the future.

Information about the future without power to do anything about it (except bet on it), like is the case for most information and most people, is useless.

Re: Uncovering insiders and alpha on Polymarket with AI

#42

Post by 0x3f »

tombert wrote: post #35

It baffles me that Polymarket is legal. Even if there wasn't any kind of insider betting going on, it just seems so disgusting to turn literally everything into a casino. There's a bet going on right now about Jesus coming back before 2027 [1], and a part of me wants to do it because I'm pretty confident Jesus isn't coming back by the end of the year (or any year), but it seems kind of wrong to try and extract money…

Polymarket's legality has not yet been tested in many places, although I don't personally object to it being legal, there's a chance it might not be.

Also, I'd advise against betting on the Jesus market. You can't actually read the price as a probability here due to time value of money, opportunity cost, etc. So you'd lose money (or at best, gain nothing) by betting against it. It's priced correctly.

Re: Uncovering insiders and alpha on Polymarket with AI

#43

Post by 0x3f »

nodesocket wrote: post #39

There is 100% insider-trading and manipulation of prediction markets. It's absurd some of the markets that are created. The most glaring example was this years super bowl halftime show. They had markets on songs Bad Bunny would sing, which song he would sing first, etc. You're telling me the thousands of people who had access to practices and information would not wager on this?

You can just stand near the stadium during practice and glean this info. I believe people did exactly that.

Re: Uncovering insiders and alpha on Polymarket with AI

#44

Post by 0x3f »

swingboy wrote: post #31
SamPatt wrote: post #15

Earlier quoted context omitted.

You can see when they buy or sell a position. It's on the blockchain so it's all public. And yes, copying positions is called copy-trading and it's extremely popular. Orders aren't public though. Only the actual trades. This is important because by the time the trade is known by others very often the edge is gone. Especially if you have other people watching the same trader and they all try to copy the trade at the s…

If it takes so long for the actual trades to show up then why is copy-trading popular?

Not all strategies are low-latency, so you can copy trade someone with a buy and hold approach. For example someone you think is an insider or whale who might influence the outcome.

Re: Uncovering insiders and alpha on Polymarket with AI

#45

Post by kibwen »

smcin wrote: post #33
kibwen wrote: post #24

Earlier quoted context omitted.

Prediction markets can only pay out based on public information, which means that prediction markets can only "reveal information" like this for things that would have been public knowledge anyway. And insiders are always risking that leaking their insider info might influence the outcome of the bet against them (like if leaking the date of a covert military operation causes the operation to be rescheduled), so they'…

You're overlooking that sudden, unexplained or counterintuitive movements in the actual prediction market itself, well before the event occurs/market resolves can themselves convey information, about what apparent insiders think (or whales want to manipulate the market to think). Obvious example: Polymarket now has 69(!) markets involving Iran: https://polymarket.com/predictions/iran Consider the timing of those mark…

> movements in the actual prediction market itself, well before the event occurs/market resolves can themselves convey information, about what apparent insiders think (or whales want to manipulate the market to think)

Yes, and surely you see that the inability to distinguish between true signal and deliberate countersignal until after the bet has resolved is an indictment of the very model of predictions markets. Like a qubit, you must collapse the waveform to extract the information.

Re: Uncovering insiders and alpha on Polymarket with AI

#47

Post by tester756 »

testaccount28 wrote: post #38
coldtea wrote: post #36

> Prediction markets have been called "truth machines" because anyone who has information missing from the market can profit. That sounds like "insider trading" machines, or "scam" machines, rather than truth machines.

yes, they allow you to pay people who have information about the future for that information, in a distributed manner. this is great if, like many people, you want information about the future.

That sounds cool and fancy in theory, but how do you find that information among the noise?

like if 50 ppl vote A, 45 people vote B and 1 person who actually knows their shit votes B?

How do you find it? By amount?

Re: Uncovering insiders and alpha on Polymarket with AI

#48

Post by tombert »

0x3f wrote: post #42
tombert wrote: post #35

It baffles me that Polymarket is legal. Even if there wasn't any kind of insider betting going on, it just seems so disgusting to turn literally everything into a casino. There's a bet going on right now about Jesus coming back before 2027 [1], and a part of me wants to do it because I'm pretty confident Jesus isn't coming back by the end of the year (or any year), but it seems kind of wrong to try and extract money…

Polymarket's legality has not yet been tested in many places, although I don't personally object to it being legal, there's a chance it might not be. Also, I'd advise against betting on the Jesus market. You can't actually read the price as a probability here due to time value of money, opportunity cost, etc. So you'd lose money (or at best, gain nothing) by betting against it. It's priced correctly.

> Also, I'd advise against betting on the Jesus market. You can't actually read the price as a probability here due to time value of money, opportunity cost, etc. So you'd lose money (or at best, gain nothing) by betting against it. It's priced correctly.

Yeah, and assuming Jesus doesn't come back that's only about a 3.6% return rate, which is what Treasury Bills are getting right now [1]. At that point I might as well do that and avoid paying state tax on my interest.

[1] https://home.treasury.gov/resource-center/data-chart-center/...

Re: Uncovering insiders and alpha on Polymarket with AI

#49

Post by 0x3f »

tester756 wrote: post #47
testaccount28 wrote: post #38

Earlier quoted context omitted.

yes, they allow you to pay people who have information about the future for that information, in a distributed manner. this is great if, like many people, you want information about the future.

That sounds cool and fancy in theory, but how do you find that information among the noise? like if 50 ppl vote A, 45 people vote B and 1 person who actually knows their shit votes B? How do you find it? By amount?

Apart from minor effects, the price is the probability. If you 'know your shit', you have more confidence and thus bid up or down until there are no more counterparties willing to accept your price, and thus the price settles at approximately the expert/insider probability.

Re: Uncovering insiders and alpha on Polymarket with AI

#50

Post by 0x3f »

jwpapi wrote: post #37
peterjliu wrote: post #30

Earlier quoted context omitted.

Post author here: To clarify, this is not a post from Polymarket. This is talking about using Compound AI (product I'm working on) to query Polymarket data, including finding insiders, just as a fun example analysis you could do. Often you need a well-calibrated probability of a future event to feed into some other analysis, and Polymarket is pretty great for that. An example is how much insurance (hedge) to buy for…

Why dont you just copy the trades?

If I'm an insider with 100% confidence, I'll take all offers at a certain price as long as I can afford it. Similar story for lower levels of confidence (but still inside info). There won't necessarily be any left for you to copy at a viable price.
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