Author: Pi Squared
Compiled by: Felix, PANews
Summary: Missing "dumb money," persistent arbitrage, rampant bots, feedback loops, fake news, insider trading, and low liquidity in niche markets.
Prediction markets are increasingly reshaping the way the public thinks about the future. From predicting election outcomes, inflation rates, to product launches and major sporting events, they offer a simple yet powerful concept: invest funds in beliefs and let the market reveal what is most likely to happen.
This approach has proven to be surprisingly effective. In many cases, the performance of prediction markets is comparable to, or even better than, traditional polls and expert forecasts. By allowing individuals with different information, motivations, and perspectives to trade on the same issue, these markets aggregate dispersed knowledge into a single signal: the price. It is generally believed that a contract trading at $0.7 indicates that the event has a chance of occurring.