After recording record trading volumes in late July and early August, the Polymarket prediction market has seen an unprecedented drop in activity in its history. Let’s take a look at the factors that may explain this surprising drop in Polymarket’s open interest.
Polymarket sees its open interest fall overnight
Last week, Prediction market platform Polymarket has seen its biggest drop in activity in its history, and this on a single day in particular.
On August 5, Polymarket's open interest reached $90.3 million, setting a record for the platform. However, the next day, its open interest has fallen by more than 28%corresponding to a decrease of $25.7 million.
👉 To better understand – What is open interest in trading and how to interpret it?
As it stands, this result may seem surprising. Indeed, in addition to open interest, The amount of transactions carried out on Polymarket reached a new record at the end of July, exceeding 275 million dollars per monthThe same was true for user engagement, which had reached a record peak.
Daily trading volume on Polymarket
In reality, several factors may have contributed to a sudden drop in Polymarket's open interest. First of all, the most likely reason would be related to the fall of cryptocurrencies that occurred during the night of August 4-5.
This potentially incentivized users of the platform to realize cashbacks, liquidating their positions. This phenomenon has been observed in many ways since More than $1 billion has been liquidated on August 5 following the flash crash of Bitcoin (BTC).
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Another reason cited by analysts concerns the Olympic Games. With the Games starting on July 26, they have enabled Polymarket to achieve record results in terms of transaction volume, engagement and open interest.
As the Olympics draw to a close, the platform has benefited less and less from the influence of this international event for its bets. However, This reason is considered the least likely, as Polymarket's open interest picked up in the following days, potentially taking advantage of the final days of the Olympics..
The last reason that would explain this drop in activity would be political. In recent days, The chances of seeing Kamala Harris win the US presidential election against Donald Trump may have had an impact on the platform's activity.
In recent weeks, the current Vice President of the United States was gradually gaining points on his Republican rival. Feeling the wind turn, Users who had placed a bet on a Donald Trump victory decided to make a cashback, recovering a small profit on their initial bet amount. This could have contributed to the decline in Polymarket's open interest.
It is important to note that these are only hypotheses. To confirm the impact of these factors on Polymarket's open interest, obtaining additional information to enable more in-depth studies remains necessary.
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Source : Dune
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Surprised by the rise of crypto-assets in the late 2010s, I started to closely follow this sector that fascinates me to the highest degree. When I am not in football stadiums, rugby or handball halls, I work on writing relevant articles about cryptocurrencies and more broadly, Web3.
Zacharie Tazrout
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