Polymarket’s Trading Volume May Be 25% Fake, Columbia Study Finds

A recent study from Columbia University suggests that nearly 25% of trading activity on Polymarket, a major blockchain-based prediction market, may be artificially inflated due to wash trading. Researchers analyzed two years of on-chain data, revealing that up to 60% of weekly trades in December 2024 were flagged as likely wash trades. This practice involves traders rapidly buying and selling contracts, often to themselves or in collusion with others, thus creating the illusion of high trading volume without altering their net market position. The findings indicated that some election and sports markets faced suspicious trading activity exceeding 90% in certain weeks. The study employed a novel algorithm identifying wash trading patterns based on wallet activity, noting complex networks of over 43,000 wallets responsible for significant suspicious trades. Polymarket’s lack of identity verification and trading fees made it particularly susceptible to manipulation, potentially driven by interests in future token incentives rather than profits. This volume inflation could distort market sentiment perceptions.

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