Cryptocurrency trading is becoming a game of “irrational exuberance” as traders race to be among the earliest investors to find the next 100x token, according to Shayne Coplan, the CEO of prediction market platform Polymarket
Coplan said that some traders can generate significant wealth through this strategy, but added that it is a “game of irrational exuberance and hot potato” where asset prices that rise must eventually come down
Nobel laureate economist Robert J. Shiller, in his 2000 book “Irrational Exuberance”, examined how optimism spreads through psychology, social dynamics and feedback effects
Similarly, some cryptocurrency traders are drawn to the asset class by the allure of quick wealth creation, but finding the next winning altcoin is difficult. In December, BitMEX co-founder Arthur Hayes argued that altcoin season never ended, but traders missed most of the big winners of the cycle
Polymarket’s traction shows traders are seeking more predictable odds Polymarket’s growing user adoption signals that some traders are looking for wagers with more predictable odds, rather than the next big cryptocurrency, according to Coplan
“On Polymarket, if you’re trading these markets, there’s no exponential upside,” explained Coplan, adding that informed traders continue taking these bets to wager on future events with more predictable odds
Polymarket ranks as the second-largest prediction market, with $1.21 billion in prediction volume over the past seven days, according to DefiLlama data. Biggest market Kalshi logged $2.3 billion
Still, a December report from 10x Research argued that prediction markets are becoming the new battleground of the crypto economy, where data-driven “elite” traders profit from the “information asymmetry” and spreads caused by casual investors seeking a quick buck
The growth of prediction markets has also attracted increasing regulatory scrutiny in the US. On Aug. 14, JPMorgan Chase reportedly ended a banking relationship with Polymarket over regulatory concerns but said it remains keen on a potential underwriting role should Polymarket seek to go public
More than a dozen US states have taken legal action against Polymarket, Kalshi, or both over sports event contracts, while authorities in several countries have also blocked or restricted access to Polymarket
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