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Polymarket's Precise Predictions: Insider Trading or Collective Intelligence?

Report Date: April 13, 2026

Recently, the prediction market platform Polymarket has gained significant attention again.

According to reports from multiple media outlets, during the recent ceasefire-related events between the U.S. and Iran at the beginning of this month, dozens of newly created accounts suddenly placed large bets just before the news broke and quickly profited after the outcome was confirmed. This has sparked discussions about possible insider trading. In recent years, prediction market platforms represented by Polymarket have become a new type of "sentiment thermometer" on Wall Street and professional investors’ desks. What is the prediction market? How should we interpret signals provided by prediction markets? How can investors reasonably use this information for trading?

What is the prediction market?

Simply put, Polymarket is a platform that allows users to place “bets” on future real-world events (such as presidential elections, tech releases, or game outcomes).

The gameplay is very straightforward: when you believe a certain event will happen, you spend money to buy shares indicating that the event is “true.” For example— the current market price for the event “Fed rate cut in June” is 0.8 cents (0.008 USD). You spend 0.8 cents to buy one share of “true.” By June, if the Fed indeed cuts rates, your share of “true” pays out as 1 USD, netting you a profit of 0.992 USD; if there is no rate cut, you lose your entire 0.8 cents investment.The price of shares reflects the market's probability pricing of the event occurring.

(Image source: Polymarket, April 12, 2026)

Historic 'Prophetic Prediction' – The 2024 U.S. Election

What truly made Polymarket famous was its 'early move' in the final weeks before the election results were announced. At that time, multiple traditional polls still described the race as neck-and-neck, but by mid-to-late October 2024, funds on Polymarket had pushed Trump’s winning probability to about 60%, significantly widening the gap with Kamala Harris. In the end, the direction indicated by the platform fully matched the election outcome, and this case has since been regarded as a representative example showing that prediction markets outperform traditional polls.

(Image source: Polymarket, November 5, 2024)

(Data source: Bloomberg, October 7, 2024 to November 15, 2024)

How should we interpret signals from prediction markets?

Compared to traditional stock markets, prediction markets focus more on specific macro events, with less noise and a better reflection of market sentiment and opinions regarding certain events.

In contrast to traditional polls, prediction markets require investors to back their judgments with real money, effectively filtering out most emotional noise. This also enables prediction markets to respond more quickly and accurately to real-time market sentiment.

However, we cannot simply view them as absolutely accurate 'market forecasts,' as insider trading and early information are extremely limited and hard to discern. More importantly, interpreting prediction signals must not ignore market volume: in low-investment, illiquid markets, odds can easily be distorted or even manipulated by a small number of large funds. Therefore, while prediction markets serve as excellent macro sentiment indicators, their signals should be analyzed rationally alongside consideration of capital scale.

How can investors use prediction markets to assist in trading?

As retail investors, we can treat prediction market platforms as a free data source to get ahead of market trends and look for reasonable investment and hedging opportunities:

1. Position related assets based on probabilities of macro events

The greatest value of prediction markets does not lie in telling you whether 'the market will rise or fall tomorrow,' but in reflecting changes in the likelihood of certain macro events earlier, such as election outcomes, tariff policies, recession risks, or interest rate cut expectations. When these probabilities consistently shift in one direction, investors can proactively assess which assets are most likely to benefit or suffer and make their moves accordingly, instead of passively chasing prices after mainstream narratives, institutional reports, and market consensus have fully formed.

2. Forward-looking hedging of macro risks

Treat prediction markets as an 'alarm bell' for the macro economy. For example, if you hold a large position in interest-rate-sensitive small- and mid-cap indices (such as Russell 2000-related products) or innovative pharmaceutical sectors, you can regularly monitor the 'probability of interest rate cuts' on prediction markets. If you notice this probability suddenly reverses and plummets without significant news, consider reducing your positions or buying put options to hedge risk.

Risk Warning: Collective wisdom can also fail

Although prediction markets are a valuable observation window, they do not constitute a stable and reliable single trading basis:

1. Transmission bias: Even if prediction markets first reflect changes in event probabilities, related assets may not immediately or accurately reprice, often being affected by positioning, liquidity, and short-term noise.

2. Whale manipulation: In some low-liquidity, topic-specific areas, well-funded 'whales' may intentionally create misleading odds by dumping or pumping prices, thereby influencing public sentiment.

3. Emotional Contagion: Prediction markets, at their core, remain a collection of people. When macro panic spreads, they might also exhibit irrational overselling or overbuying.

Therefore, the 'precise predictions' in prediction markets are not 'trading answers'; real investment decisions still need to be based on facts, logic, and risk control.

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News source:

TVB News, April 10, 2026. https://news.tvb.com/tc/world/69d8d8b24a71c3f57afe0166/International-Reports suggest that at least 50 mysterious accounts accurately predicted the US-Iran ceasefire and profited hundreds of thousands of dollars.

Investment involves risks, including possible loss of principal. Any forecasts, outlooks, or opinions contained herein are for your reference only and are not guaranteed. The information contained herein reflects market conditions and our views as of the publication date, and any changes will not be notified separately. This material is issued by China AMC (Hong Kong) Limited. This material has not been reviewed by the Securities and Futures Commission of Hong Kong. For full details and risks related to the funds mentioned, please refer to our official website and prospectus.

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