How can I make $100,000 through arbitrage in the prediction market?

Author: Pix

Compiled by: Luffy, Foresight News

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 and 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 5000 dollars by the end of the year?"
• "Will MrBeast run for president?"
• "Will Kanye West issue tokens?"

Every market has different user groups, and each group has its own biases. This means that the pricing of the same event will differ across different platforms, and that is where the opportunity lies.

Example: If platform A quotes "will" at 0.4 USD and platform B quotes "will not" at 0.55 USD, then regardless of the outcome, you can secure a profit of 0.05 USD, this is arbitrage.

Step 2: Identify Your Strengths

The most effective strategy for me is the multiple outcome market, where pricing errors are most likely to occur.

Example:

• Who will win the F1 championship this weekend?
• Which party will win the UK general election?
• Who will be eliminated next on "Love Island"?

In theory, the sum of the probabilities of all outcomes should be 100%, but in reality, it is common to see a total that reaches 110%.

Reason: The platform usually charges implicit fees ("excessive premium"), and the odds are determined by users, leading to a large amount of inefficient pricing.

Step 3: How to Determine if an Arbitrage Opportunity Exists

Core Rules:

• Find the same event on different platforms;
• Select the lowest price for each result;
• If the total price is below 1 dollar, arbitrage is possible.

Real case: Who is the next pope?

The quotes from the two platforms are as follows:

The strategy is to buy all outcomes, ensuring that one will be realized, which guarantees a profit of 1 dollar. Each trade yields a profit of 0.021 dollars (2.1% risk-free return), which is arbitrage. You are not betting on who will become the pope, but rather on the fact that two platforms cannot agree on who will become the pope. And when they disagree, you can make money.

The liquidity of Myriad is much worse, but there are two other websites with price differences that are closer. If you pay attention to more markets, you will find greater advantages.

I usually only engage in arbitrage when the APY is above 60% (APY = (interest rate spread / days to solve) × 365).

The event ends 29 days later in this example:

(0.021 / 29) × 365 ≈ 26.4% APY (below my threshold of 60%, give up).

If the event ends after 7 days:

(0.021 / 7) × 365 ≈ 109.5% APY (decisively entering the market).

Step 4: Race Against Time

Predictive market arbitrage is a delayed game:

After the price discrepancy occurs, there is usually only a few minutes time window, rather than a few hours; rumors spreading, platform updates lagging, etc., can all lead to price differences, and your advantage only exists during this period.

If possible, please automate this part and use price alerts on Discord, Telegram, and Twitter. Sometimes I can spot price differences just by muscle memory. The quicker you act, the more you earn. Hesitate for 5 minutes, and the price difference disappears. The best spread I've achieved is 18%, which is quite a substantial profit.

It is important to remind that you need to ensure that there are available funds on each platform and be aware of the fees.

Step 5: Exit early

Most people wait for the results to be announced, while I took profits before the results were clear.

Assuming I buy all results at $0.94, I would have a price difference of $0.06. 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 can significantly increase the APY and quickly switch to the next market.

Additional tips

• Looking for overlapping events: For example, "Trump wins the 2024 election" and "Republicans win the election" may have hidden arbitrage;
• Target niche markets: more pricing errors, less competition;
• Utilize niche platforms: larger price differences, potential airdrop rewards;
• Carefully read the settlement rules: one word may change the outcome;
• Carefully verify: confirm the order book, transaction price, and calculate including all fees.

Summary

I earned 100,000 dollars in just over 2 months, with periods of both calm and busyness. The greater the volatility, the more price differences there are, but even when the market is calm, there is always another inefficient market waiting to be discovered.