This is not an article bragging about how strong a trader is, but rather emphasizes that traders can make money by paying attention to the subtle price differences across various prediction platforms. This article is based on a tweet by Pix titled “How I Made $100k Arbitraging Between Prediction Markets (Full Guide),” compiled, translated, and rewritten by Luffy from Foresight News.
Background: What is the secret to a trader’s success? How can profits be made in both bull and bear markets?
Background Supplement: From the brink of bankruptcy to crypto legend—trader Eugene: What I learned about investment rules from leverage collapse.
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 $5,000 by the end of the year?”
- “Will MrBeast run for president?”
- “Will Kanye West issue a token?”
Each market has a different user base, and each group has its own biases. This means that the pricing for the same event can vary across different platforms, and this is where the opportunity lies.
For example: If Platform A quotes “yes” at $0.40 and Platform B quotes “no” at $0.55, you can lock in a profit of $0.05 regardless of the outcome, which is arbitrage.
Step 2: Find Your Edge
The strategy that works best for me is multi-outcome markets, which are the most likely to have pricing errors.
Examples:
- Who will win the F1 championship this weekend?
- Which party will win the UK elections?
- Who will be the next contestant eliminated from “Love Island”?
Theoretically, the probabilities of all outcomes should sum to 100%, but in reality, you often see totals exceeding 110%.
The reason: Platforms often charge hidden fees (called “excess premiums”), and odds are determined by users, leading to significant inefficiencies in pricing.
Step 3: How to Determine if an Arbitrage Opportunity Exists
Core Rule:
- Find the same event on different platforms;
- Select the lowest price for each outcome;
- If the total price is below $1, arbitrage is possible.
Real Case: Who will be the next Pope?
The quotes from two platforms are as follows:
The strategy is to buy all outcomes, ensuring that one of them will occur, thus guaranteeing a return of $1. Each transaction yields a profit of $0.021 (2.1% risk-free return), which is arbitrage. You’re not betting on who will become the Pope, but rather on the two platforms’ inability to agree on who will be the Pope. When they disagree, you profit.
Myriad has much worse liquidity, but there are two other sites with price differences that are closer together. If you watch more markets, you will find greater advantages.
I typically only engage in arbitrage when the APY exceeds 60% (APY = (Profit Margin / Days to Resolution) × 365).
In this case, the event concludes in 29 days:
(0.021 / 29) × 365 ≈ 26.4% APY (below my threshold of 60%, pass).
If the event concludes in 7 days:
(0.021 / 7) × 365 ≈ 109.5% APY (decisively enter).
Step 4: Race Against Time
Arbitrage in prediction markets is a game of delay: After a price discrepancy appears, there is usually only a few minutes of time window, not hours; rumors circulate, platform updates lag, etc., all contributing to price differences, and your advantage exists only during this period.
If possible, automate this part, using price alerts on Discord, Telegram, and Twitter. Sometimes, I can spot price discrepancies just from muscle memory. The faster you act, the more you earn. Hesitate for 5 minutes and the price difference vanishes. My best spread achieved was 18%, yielding substantial profits.
It is important to ensure that there are available funds on each platform and be clear about transaction fees.
Step 5: Exit Early
Most people wait for results to be announced, while I take profits before outcomes are clear.
Assuming I buy all outcomes at $0.94, I have a $0.06 margin. I don’t need to wait for the results; if the market tightens, I can sell at $0.98 or $0.99 and exit.
This greatly enhances the APY and allows for a quick switch to the next market.
Additional Tips
- Look for overlapping events: For example, “Trump wins the 2024 election” and “Republicans win” may have hidden arbitrage;
- Aim for small markets: more pricing errors and less competition;
- Utilize niche platforms: larger price discrepancies and potential airdrop rewards;
- Read settlement rules carefully: a single word can change the outcome;
- Double-check: Confirm order books, transaction prices, and calculate all fees.
Conclusion
I earned $100,000 in just over two months, experiencing both calm and busy periods. The greater the volatility, the more price differences, but even in a calm market, there is always another inefficient market waiting to be discovered.
