There are 3 ways to use prediction markets to develop into a greater crypto investor.
Prediction markets are seemingly all over the place today. They’re getting used to predict the outcomes of political elections, sporting occasions, and nearly any state of affairs you possibly can probably think about — from whether or not or not the United States will invade Greenland, to what number of Oscars a nominated movie will win this yr.
As you may think, prediction markets are additionally widespread with crypto traders. With that in thoughts, listed here are 3 ways prediction markets can be utilized to make you a extra profitable crypto investor.
Get a fast temperature verify on a particular cryptocurrency
A few of the hottest cryptocurrencies for prediction markets embrace Bitcoin (BTC +0.22%), Ethereum (ETH 3.88%), and XRP (XRP 3.93%). All of them are sometimes topics of rampant hypothesis about how a lot increased (or decrease) they could go. Thus, they’re an ideal match for prediction markets.
At this time’s Change
(0.22%) $180.95
Present Value
$82687.00
Key Information Factors
Market Cap
$1.7T
Day’s Vary
$81953.00 – $84368.00
52wk Vary
$74604.47 – $126079.89
Quantity
54B
Utilizing knowledge from prediction markets, it is simple to see how a prediction about the future worth of Bitcoin (or every other cryptocurrency) is de facto only a vary of doable outcomes that can be utilized as inputs for a statistical model.
For instance, on Polymarket, there is a 45% likelihood of Bitcoin hitting a worth of $120,000 in 2026 and a 22% likelihood of it hitting a worth of $150,000. On the different hand, there is a not insignificant (9%) likelihood of Bitcoin fully cratering in worth and dropping all the method to $25,000.
Make directional bets on a particular cryptocurrency
You may as well use prediction markets to place speculative bets on the future worth of a well-liked cryptocurrency. This goes one step past simply checking in on the worth of, say, Bitcoin. You are actually actively placing your cash to work by buying prediction market contracts. If the consequence is “sure,” you win. If the consequence is “no,” you lose.
Picture supply: Getty Photographs.
For instance, final yr, I purchased some prediction market contracts for the future worth of Bitcoin. My contracts predicting a future worth of $125,000 in 2025 settled “sure,” and I made cash, as a result of Bitcoin ultimately hit an all-time excessive of $126,000 in October. Nonetheless, my contracts predicting a future worth of $150,000 and $200,000 for Bitcoin settled “no,” and I misplaced the whole lot.
Hedge your crypto place
It is also doable to hedge a particular crypto place. In different phrases, you should buy prediction market contracts to present some draw back threat safety for a core holding in your portfolio.
For instance, to illustrate you maintain some XRP in your portfolio. You are wildly bullish, and expect XRP to soar in value. Nonetheless, what if XRP as a substitute collapses in worth? Simply in case, you may want to purchase some prediction market contracts that predict a decline in worth for XRP. That method, you’d win even when you lose.
The entry of Robinhood into prediction markets
So far, the two large names in prediction markets are Kalshi and Polymarket. However there’s one comparatively new entrant — Robinhood Markets (HOOD 1.74%) — that has been making a big splash with its own prediction market contracts. These have been first launched in October 2024, and now embrace prediction market contracts for particular cryptocurrencies, together with Bitcoin, Ethereum, XRP, Dogecoin (DOGE 3.06%), and Solana (SOL 0.89%).
That leads me to assume that prediction markets will develop into an increasing number of integral to managing a crypto portfolio going ahead. Perhaps you do not at the moment consider your self as a hedge fund manager, however with prediction market contracts, you now have entry to some very highly effective instruments for earning money, regardless of which method the markets transfer.
