For the market to be trading at 16%, there need to be market participants on both sides of the trade
Assuming a market is trading.. Manifold, Kalshi, and Polymarket all display percentages on markets that have literally never had any volume, so UIs mislead those not inspecting orderbooks/volume/etc. Currently, Kalshi is the only one of those that even requires limit orders placed in the orderbook to start displaying percentages
> why would anyone buy Yes > there’s an equal number of Yes and No shares circulating
at unequal pricing. For those heeding return rates, incentives to buy away from 50% are limited before incentives to buy towards 50%. In markets around 1%, one only needs a bit over 1.01% for more incentive than any possible return in the other direction; therefore, incentives can be unilaterally broken in a single direction: https://polymarket.com/event/will-jesus-christ-return-in-2025
No one believes the Jesus market will resolve to Yes
That’s why I chose that market as an example of incentives being unilaterally broken in a single direction; ~everyone agrees that ~3% market won’t happen, but no one has much incentive to trade in that direction collecting >$30k USD correcting that market because that’d return lower than the risk-free rate. Both posts similarly claim interest rates are essential to understanding how much prediction markets reflect actual event probabilities, and interest rate distortion becomes more unilaterally directional the further a market should be from 50%
Assuming a market is trading.. Manifold, Kalshi, and Polymarket all display percentages on markets that have literally never had any volume, so UIs mislead those not inspecting orderbooks/volume/etc. Currently, Kalshi is the only one of those that even requires limit orders placed in the orderbook to start displaying percentages
> why would anyone buy Yes
> there’s an equal number of Yes and No shares circulating
at unequal pricing. For those heeding return rates, incentives to buy away from 50% are limited before incentives to buy towards 50%. In markets around 1%, one only needs a bit over 1.01% for more incentive than any possible return in the other direction; therefore, incentives can be unilaterally broken in a single direction:
https://polymarket.com/event/will-jesus-christ-return-in-2025
No one believes the Jesus market will resolve to Yes. See https://www.lesswrong.com/posts/LBC2TnHK8cZAimdWF/will-jesus-christ-return-in-an-election-year for an explanation of what people are betting on
That’s why I chose that market as an example of incentives being unilaterally broken in a single direction; ~everyone agrees that ~3% market won’t happen, but no one has much incentive to trade in that direction collecting >$30k USD correcting that market because that’d return lower than the risk-free rate. Both posts similarly claim interest rates are essential to understanding how much prediction markets reflect actual event probabilities, and interest rate distortion becomes more unilaterally directional the further a market should be from 50%