politics

Professor at NYU. Interested in Cryptography.

i've seen this happen a lot on open prediction election markets with substantial volume.

my theory is that there's a lot of early buyers who took the correct position, and as it starts to approach the resolution epoch, the cost/benefit of getting the last few % vs cashing out early starts to shift.

let's say i bought at 5% and now it's sitting at 85%, i already got 1700% relative returns, why risk everything for another +15% (17% relative return)?

so all of these people start cashing out, which starts a downward trend, which perpetuates for a while until it recalibrates back.

A doodler and computerer. I like permissive/permissionless open source, smart contracts, p2p systems, room-scale VR, and NixOS.

shazow.net

Currently: WhatsABI

yea, there's a lot of weird quirks like this around "open" prediction markets (ones where you can enter/exit at any time, as opposed to being locked in from the start until the outcome).

they still converge to the same result at the very end, but the journey can be quite different.

ah, that makes sense to me.

so e.g. we’re assuming the influx of Cuomo sellers at 80-90% were buyers at ~20% who still think he’s going to win but are locking in gains

sorry, should have put "correct" in scare quotes lol (no indication if it's going to be correct at epoch, just that it's the current prevailing position that they purchased at a discount)

This this this. The r/r on prediction markets, especially for multiple-choice ones, does not encourage holding until resolution.