How to Make Money by Predicting the Market Through Encryption? The Latest Arbitrage and Market Making Guide for 2026

Foreseeing the future—this has been a way to make big money since ancient times. Today, crypto prediction markets have brought this age-old game onto the blockchain, turning “judgments about the future” directly into tradable financial instruments. This track is expanding at an exponential rate: at the beginning of 2024, the monthly nominal trading volume of prediction markets was less than $100 million; by early 2026, Polymarket’s monthly trading volume soared from about $1.2 billion in 2025 to over $20 billion, with active wallet numbers increasing more than threefold in six months. The prediction market’s monthly trading volume has surged from approximately $1.2 billion in 2025 to over $20 billion in early 2026, with active wallets growing more than three times in six months.

According to data from Dune Analytics, in April 2026, the taker volume of prediction markets reached $8.6 billion; Polymarket and Kalshi’s cumulative transaction volume surpassed the historic threshold of $150 billion, marking a turning point where prediction markets transition from niche trading products to mainstream financial markets. Prediction markets are experiencing an exponential boom—monthly nominal trading volume skyrocketed from under $100 million to over $13 billion, a 130-fold increase.

Basic Understanding: What Are Prediction Markets?

Prediction markets allow users to bet “yes” or “no” on future real-world events—from whether the Federal Reserve will cut interest rates, whether Bitcoin’s price can break a certain threshold, to how geopolitical events will evolve—all of which can become tradable assets. Unlike traditional crypto spot or futures trading, prediction markets do not look at candlestick charts, only probabilities.

Mechanically, users buy shares based on the outcome of an event; if their prediction is correct, they can recover stablecoins (usually USDC or USDT), and if wrong, their shares become worthless. Share prices fluctuate between $0 and $1, essentially representing the market’s collective estimate of the event’s probability. In 2026, prediction markets are moving beyond simple speculation, gradually embedding into global macroeconomic analysis, institutional risk management, and mainstream news narratives, becoming the core engine for real-time sentiment and pricing alerts.

Strategy 1: Delayed Arbitrage—High-Frequency Play for Tech Savvy

Delayed arbitrage is currently one of the most efficient structured strategies. Its core logic: the spot prices on centralized exchanges are updated in real-time via WebSocket, while the probability data in prediction markets is transmitted through oracles, with a delay of several seconds.

Take the 15-minute “up/down” contracts for BTC, ETH, SOL on Polymarket as the battlefield. Traders monitor real-time on-chain prices; when BTC rapidly rises on Binance, but the “up” contract probability in Polymarket remains at 50% to 55%, a significant pricing discrepancy forms. Once the centralized exchange price spikes instantly, but the prediction market’s probability hasn’t caught up, traders can quickly buy undervalued shares, wait for the price to correct, and sell for profit.

Operational points:

• Choose 15-minute short-cycle contracts with high liquidity and frequent information updates;
• Set an expected value threshold of at least 3% to 5% to avoid frequent invalid trades;
• Use low-latency VPS; WebSocket architecture is a technical requirement;
• Take profits early (e.g., in the 0.80 to 0.95 range), and do not hold until settlement.

Strategy 2: News Event Arbitrage—Information as the Greatest Leverage

Crypto markets are highly sensitive to news. Prediction markets rely on oracles to fetch external data, and there is an inherent delay from news events to probability adjustments. This means traders with faster information access can seize the advantage.

During sensitive windows of geopolitical, central bank decisions, or earnings releases, the speed of information acquisition directly determines trading edge. Professional players on Polymarket do not merely “predict” the future but react faster than news cycles.

Operational points:

• Monitor mainstream media and official announcements, pre-judge event trajectories;
• Look for mismatched opportunities in low-heat, high-value niche markets;
• Platforms support multi-event hedging, reducing single-point risks.

It is worth noting that in March 2026, CFTC Enforcement Director David Miller explicitly stated at NYU Law School that “insider trading (including within prediction markets)” is among the top five enforcement priorities. CFTC Chairman Selig also publicly announced a “zero-tolerance” policy toward fraud, manipulation, and insider trading. This means that profiting from undisclosed information (“insider info arbitrage”) is no longer safe. Ordinary users are advised to focus on developing their own information channels and analytical skills rather than trying to operate in gray areas.

Strategy 3: Following the “Smart Money”—Leveraging On-Chain Data and Dune

Multiple studies point to a harsh but undeniable fact: prediction markets are a asymmetric information battle. WSJ analyzed 1.6 million Polymarket accounts and found that 67% of profits were captured by just 0.1% of professional traders; meanwhile, over 70% of ordinary users are losing money.

However, the path of “smart money” is clear. Tracking the historical positions of top wallets via on-chain data tools provides the most direct information advantage for individual investors.

Based on Odaily’s analysis of top wallets’ on-chain data in Polymarket (as of May 5, 2026), just the top 10 wallets in political markets contributed $94 million in profit; in sports markets, the top 10 wallets contributed $60 million; in crypto markets, $25 million. The top wallet in politics has earned $22 million, in sports $11.3 million, and in crypto $4.7 million.

Interestingly, there is no single universal strategy for big profits. Among top traders, at least three nearly mutually exclusive approaches exist: political whales focus on low-position, high-conviction bets, while sports winners dominate high-frequency multi-market trades exceeding a thousand transactions.

Strategy 4: Providing Liquidity and Incentive Betting—A Steady Choice for Long-Term Holders

For investors unwilling to trade frequently and with larger capital, providing liquidity (market making) in prediction markets is a feasible path. By buying shares across multiple outcomes and placing buy/sell orders, market makers can earn from the bid-ask spread continuously.

Some decentralized prediction platforms also offer token incentives to liquidity providers and market makers. For example, Augur allows users to stake REP to participate in market settlement and earn fee shares. Polymarket also has a comprehensive market maker incentive system, with over $10 million in incentives allocated to market makers.

Institutional Entry and Regulatory Trends: Certainty in 2026

In 2026, institutional capital is pouring into prediction markets at an unprecedented speed. On May 5, a16z announced the launch of its fifth crypto fund, “Crypto Fund 5,” with a size of $2.2 billion, explicitly listing prediction markets as a core investment focus; on the same day, Haun Ventures announced closing a new $1 billion fund, also focusing on AI agents and crypto crossover fields. Reports suggest Goldman Sachs is researching prediction markets, indicating growing institutional interest in decentralized prediction platforms.

On the regulatory front, the institutionalization of prediction markets is accelerating. On April 16, 2026, CFTC Chairman Selig repeatedly emphasized at a congressional hearing that the CFTC has “broad exclusive jurisdiction” over prediction markets, and has issued a consultation notice and proposed rulemaking (ANOPR) seeking public comments on a comprehensive regulatory framework, deadline April 30. Kalshi, an early licensed CFTC-regulated platform, can serve U.S. users; while Polymarket, after settling in 2022, remains prohibited from serving U.S. users but is negotiating with the CFTC for deregulation and is raising $400 million at a $15 billion valuation.

These signals from institutions and regulatory developments indicate that prediction markets are evolving from niche crypto experiments into regulated mainstream financial infrastructure, with ongoing growth prospects and increasing participation value.

Summary

Crypto prediction markets are in a historic period of rapid growth. As of May 1, 2026, the total open interest of prediction contracts reached $1.11 billion, with Polymarket and Kalshi accounting for 85% to 95% of industry volume. Industry forecasts project that the trading volume of prediction markets in 2026 could reach $240 billion, with a long-term trajectory toward $1 trillion.

Four mainstream strategies each suit different scenarios:

• Delayed Arbitrage: suited for tech-savvy high-frequency traders
• News Arbitrage: tests speed of information access and independent judgment
• Decentralized Copy Trading: for steady participants wanting to replicate “smart money” strategies
• Liquidity Provision: for long-term holders seeking passive income with larger capital

No matter which strategy you choose, barriers are being significantly lowered. In March 2026, Gate officially integrated Polymarket, the world’s largest decentralized prediction platform, becoming the first centralized crypto exchange to do so. Users can update the Gate App to version v8.12.5 or above, then access the “Alpha” page’s “Polymarket” module to start trading. Gate offers two ways to participate: one is directly using USDT via spot account without on-chain operations; the other is connecting a Web3 wallet and trading/settling with USDC on Polygon, suitable for users preferring decentralized operations.