How does smart money make 2 million annually in prediction markets? Unveiling the logic behind high-frequency arbitrage

【Blockchain Rhythm】There’s an interesting trading case worth discussing. A smart money address “RN1” has performed remarkably well on the prediction market Polymarket—initially investing only $1,000 at the beginning of the year, and now having accumulated profits of over $2 million. This number sounds exaggerated, but the underlying trading logic is actually quite worth studying.

This address has participated in over 13,000 predictions this year, mainly focused on the sports sector, with a single maximum profit reaching as high as $129,000. At first glance, it might seem like a prediction expert, but the actual situation is more interesting.

According to analysis from some seasoned traders, the true strategy of this smart money isn’t making money through precise predictions of sports events. Instead, it exploits the price discrepancies caused by the asynchronous nature of automated market makers (AMMs) on the Polymarket platform to perform arbitrage. Simply put, within the same market, prices at different times can have slight deviations, and they repeatedly arbitrage through high-frequency trading within these price gaps.

This approach has a high barrier for ordinary users—requiring a deep understanding of market mechanisms, high trading frequency, and mature automation tools. But it indeed represents a real arbitrage opportunity in prediction markets. For platforms, such trades neither violate rules nor harm liquidity, but they also highlight that the AMM mechanism itself still has room for optimization.