KOL: How can I make $100,000 through arbitrage in prediction markets?

Original Author: Pix

Original compilation: Luffy, Foresight News

Most people gamble in prediction markets, while I arbitrage in prediction markets. Here are the specific strategies I used to earn $100,000 from decentralized, inefficient prediction markets.

Step 1: Understand the Game Rules

Prediction markets allow you to bet on the outcomes of real-world events, such as:

• "Will Ethereum rise to $5000 by the end of the year?"
• "Will MrBeast run for president?"
• "Will Kanye West issue tokens?"

Each market has its own user group, and each group has its own biases. This means that the pricing of the same event will differ across different platforms, and that is where the opportunity lies.

Example: If platform A quotes "will" at 0.4 USD and platform B quotes "will not" at 0.55 USD, then regardless of the outcome, you can lock in a profit of 0.05 USD, and this is called arbitrage.

Step 2: Identify Your Strengths

The most effective strategy for me is the multi-outcome market, where pricing errors are most likely to occur.

Example:

• Who will win the F1 championship this weekend?
• Which party will win the UK election?
• Who will be eliminated next in "Love Island"?

In theory, the sum of the probabilities of all outcomes should be 100%, but in reality, it is common for the total to reach 110%.

Reason: Platforms often charge hidden fees ("excessive premiums"), and the odds are determined by users, leading to a large amount of inefficient pricing.

Step Three: How to Determine if an Arbitrage Opportunity Exists

Core rule:

• Find the same event on different platforms;
• Select the lowest price for each result;
• If the total price is below 1 dollar, arbitrage is possible.

Real case: Who will be the next pope?

The quotes from the two platforms are as follows:

The strategy is to buy all outcomes, ensuring that one will come to fruition, thus guaranteeing a profit of 1 dollar. Each trade yields a profit of 0.021 dollars (2.1% risk-free return), which is arbitrage. You are not betting on who will become the Pope, but rather betting that two platforms cannot agree on who will become the Pope. And when they disagree, you can make money.

The liquidity of Myriad is much worse, but there are two other websites with closer price differences. If you pay attention to more markets, you will find greater advantages.

I usually only arbitrage when the APY is above 60% (APY = (interest margin / days to resolve) × 365).

The event ends 29 days later in this example:

( 0.021 / 29) × 365 ≈ 26.4% APY (below my threshold of 60%, give up).

If the event ends after 7 days:

( 0.021 / 7) × 365 ≈ 109.5% APY (decisively enter the market).

Step Four: Racing Against Time

Predictive market arbitrage is a delayed game:

After the price difference occurs, there is usually only a few minutes time window, not a few hours; rumors spreading and platform updates lagging can lead to price discrepancies, and your advantage only exists during this period.

If possible, please automate this part and use price alerts on Discord, Telegram, and Twitter. Sometimes I can spot price differences purely from muscle memory. The quicker you act, the more you earn. Hesitate for 5 minutes, and the price difference disappears. The best spread I've achieved is 18%, and the profit is quite substantial.

It is important to remind that you should ensure that there are available funds on each platform and be clear about the fees.

Step 5: Early Exit

Most people wait for the results to be announced, while I take profits before the results are clear.

If I buy all results at $0.94, I have a $0.06 price difference. I don't need to wait for the results; if the market tightens, I can sell at $0.98 or $0.99, and I will exit.

This can significantly increase the APY and quickly switch to the next market.

Additional Tips

• Looking for overlapping events: For example, "Trump wins the 2024 election" and "Republicans win" may have hidden arbitrage opportunities;
• Targeting small markets: more pricing errors, less competition;
• Utilize niche platforms: larger price differences, possible airdrop rewards;
• Read the settlement rules carefully: one word may change the outcome;
• Carefully verify: Confirm the order book, transaction price, and calculate including all fees.

Summary

I earned 100,000 dollars in just over 2 months, during which there were both calm and busy times. The greater the volatility, the more price differences there are, but even in a calm market, there is always the next inefficient market waiting to be discovered.