Independent analyses by two crypto research firms have uncovered evidence of artificial trading on Polymarket, where the platform's betting odds have been widely circulated across social media and major news outlets.

Polymarket's prediction market surged in public interest during the 2024 U.S. elections. The platform reported $2.7 billion in bets on whether Donald Trump or Kamala Harris would be elected in early November. Prestigious publications like The Wall Street Journal and Fortune cited Polymarket’s odds alongside traditional indicators, such as poll data.

However, investigations by blockchain firms Chaos Labs and Inca Digital revealed signs of fake trading on Polymarket. Both companies found a notable discrepancy in Polymarket’s reported volume on its presidential market. Inca Digital determined that actual transaction volume on the presidential betting market was closer to $1.75 billion, significantly less than Polymarket’s reported $2.7 billion.

Omer Goldberg, founder of Chaos Labs, remarked:

Prediction markets face the same challenges as any other market-based application. Fake trading isn’t unique to Polymarket.

Chaos Labs explained that Polymarket combines shares traded with dollar figures. For example, users can buy shares in candidates with varying odds. A “yes” share for Hillary Clinton becoming president might cost only $0.01, given the extreme unlikelihood of her election, but Chaos Labs found that Polymarket reports this as $1 in volume.

To support their findings, Chaos Labs examined on-chain data to isolate high-volume traders and filtered out users likely involved in regular activities like market-making. They further identified users exhibiting signs of fake trading by analyzing their buy-sell ratios and comparing their shares held with their total trade volume. Chaos Labs concluded that approximately one-third of trading volume, and total users, on the presidential market alone were likely fake trades, similar to findings across other markets.

This discrepancy, coupled with the potential for fake trades, underscores the unverified nature of a platform that many rely on for signals about the presidential race. This could significantly impact market sentiment and potentially fuel a bull run.

How Could This Impact the Market?

With all the election buzz fueling Bitcoin’s dominance, the chances for a short-term altcoin rally are looking slim. Altcoin season started when at least 75% of the top 50 altcoins outperform Bitcoin over a three-month period.

But recent data from Blockchain Center shows that only 29% of these top altcoins have outperformed Bitcoin over the past 90 days — well below the 75% threshold needed to officially declare an “altcoin season.”

Meanwhile, Bitcoin ETFs are pulling in major capital. In October alone, spot Bitcoin ETFs attracted $4.1 billion. According to a report from digital asset research firm 10X Research, this surging ETF demand could push Bitcoin’s price up to $100,000 by January 2025.

With this wave of capital flowing into Bitcoin ETFs, both individual and institutional investors are likely to prioritize BTC over the lesser-known altcoins, leaving the “altcoin season” waiting in the wings a little longer.

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