Messari: What's Missing for the Market to Truly Take Off?

Original Article Author: Dylan Bane, Messari Analyst

Original Article Translation: Deep Tide TechFlow

The application of prediction markets has surpassed the electoral arena, demonstrating Product/Market Fit (PMF).

The betting volume is skyrocketing, investors are flocking in, and new methods such as information perpetual contracts (information perps) and Telegram bots are entering the market.

So, which methods can truly be effective and maximize the growth of trading volume?

The 2024 election saw Polymarket's trading volume soar from $62 million in May to $2.1 billion in October, a 3268% increase.

Mainstream media like CNN and Bloomberg quoted Polymarket's odds in their live broadcasts, alongside traditional polling data.

In fact, prediction markets ultimately outperformed polling in predicting election outcomes.

Post-election, while the trading volume of prediction markets has decreased, it has still stabilized at over $1 billion per month.

Coupled with Kalshi's recent surge in trading volume, investors believe the prediction market has validated demand and is poised for further growth.

Approximately 90% of the funds are concentrated in two platforms, Polymarket and Kalshi, with valuations nearing double-digit figures (i.e., tens of billions of dollars).

These industry leaders have established liquidity and are now focused on expanding trading volume and enhancing market resilience, as large exchanges like Hyperliquid and Coinbase are turning their attention to this space.

However, there are over 100 prediction market projects, with more continually emerging, presenting a plethora of opportunities.

The question remains: How should investors navigate this increasingly complex and noisy space to find the best opportunities?

We believe that the best way to address liquidity issues and increase trading volume is to attract retail speculators.

Prediction markets can attract this niche market segment by focusing on accessibility, fun, user experience, and high potential financial returns.

Continuous Liquidity for Informational Futures

Due to the constant fluctuations of informational futures, they overcome the problem that hindered speculators in binary outcome markets due to slow settlement.

Such informational futures can also track interesting and easily understandable themes that currently have no existing markets.

Frontend Platforms

Rather than building native liquidity, startups can source supply from existing industry leaders and provide users with a higher-quality trading experience.

For example, Flipr offers a trading terminal, trading bots on the X platform, and up to 10x leverage using existing liquidity.

Social Applications

Gamified apps or social experiences can make prediction markets more engaging.

Just as sports betting is fundamentally a social experience, prediction markets can foster similar interactive experiences.

In the early stages of adoption in prediction markets, the design space is very broad.

Basket trades, managed indexes, celebrity copy trading, parlays, and other innovative forms are all worth exploring.

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