Non-election-related market volumes on Polymarket are up 391% year-to-date.
Written by: ParaFi Capital
Compiled by: 1912212.eth, Foresight News
As Polymarket’s trading volume has exploded recently, ParaFi, as one of Polymarket’s largest single investors, analyzed on-chain data to clarify two important questions:
What factors have contributed to Polymarket’s recent traction and attention?
How much is Polymarket’s crazy growth related to the US election?
ParaFi has been researching and investing in prediction markets since 2018. It participated in Polymarket’s seed round in 2020 and continued to increase its investment in the following years.
As the 2024 US election approaches, Polymarket's trading volume from the beginning of the year to date has reached US$688 million (Note: The Block's latest data shows that its total trading volume has exceeded US$1 billion), and its weekly active users have increased from about 1,400 to more than 20,000, an increase of about 14 times.
Polymarket is widely referred to as the "source of truth" for real-time insights into major events happening around the world, and has been cited by presidential candidates, Bloomberg, and the Wall Street Journal, among other media outlets.
Over the past 12 months, traffic to Polymarket’s website has grown exponentially. Its daily traffic has increased 10-fold, with cumulative page views exceeding 32 million. In late July, Polymarket peaked at 1.3 million page views per day and 185,000 daily visitors.
As can be seen from these data, the number of people visiting its website is several orders of magnitude greater than the number of users who actually trade. The popularity of Polymarket shows that this type of platform is on the rise and becoming a major alternative to traditional media.
Is the US election the only driver of Polymarket’s growth? Not entirely.
Of the nearly 70,000 addresses that used Polymarket for the first time, only 42% made their first trade in election prediction markets, while the remaining 58%, or about 40,000 users, initially traded in non-election markets, including culture, business, science, and macroeconomics.
Some of our favorite prediction markets include: Olympic medal count, Taylor Swift’s engagement, and GPT-5 release date.
While first-time user activity appears more dispersed, more than 70% of daily trading volume in recent weeks has been tied to election-related prediction markets, which is not surprising given the proximity and volatility of the U.S. election.
However, other Polymarket markets have also managed to attract public attention. For example, in May 2024, a surge in non-election-related trading volume was driven by the approval of the Ethereum ETF, with cumulative trading volume exceeding $13 million.
Non-election-related market volumes on Polymarket have also been growing like crazy this year, up 391% year-to-date.
Of the 28,000 users who placed their first bet in election-related markets, 56% subsequently traded in other markets as well.
Basically, almost half of these users on Polymarket have also turned to prediction markets covering topics such as economics, sports, and cryptocurrencies.
Another piece of data that proves that users continue to be active on the platform is the quarterly retention rate of different groups. At least 15% of users who registered on the platform in Q1 2023 used Polymarket in each subsequent quarter.
It’s worth noting that Polymarket’s retention rate hasn’t dropped significantly over time, even as the quarters have gone by. The proportion of users in Q1 2023 returning in Q3 2023 is roughly the same as it is now in Q3 2024.
Retention rates have actually improved in recent quarters following a surge in election-related trading, as traders from early user groups were incentivized to return to the platform.
Recent retention data is also strong. More than 45% of users who traded on Polymarket for the first time in Q1 2024 continued to trade in the following quarter, compared to only 25% in Q1 2023.
Trading volume is only a portion of overall trading activity. We see consistent trends in terms of trading volume and number of users, and the number of matched trades on Polymarket has also surged in the past few months. Since the beginning of the year, the number of trades per match on Polymarket has jumped by more than 3,000%, and even exceeded 40,000 in late July.
The increase in Polymarket’s matched trade volume is not surprising given the rise in other metrics, but it does suggest that the growth in volume is not just due to users betting more money. In fact, the volume of trades facilitated by Polymarket is also increasing.
It is worth noting that the ratio of daily matched transactions divided by daily active users has been trending upward recently. Although the trend has been volatile this year, this ratio indicates that users are more engaged on the platform every day.
Looking at the volume data, heavy users do not necessarily dominate the platform data performance. We define heavy users as those who trade more than $250,000 in a day. In Q1 and Q2 of 2024, heavy users accounted for 51% of daily trading volume. As Polymarket's user base shifts toward small traders, its market share has recently declined.
ParaFi believes that prediction markets are valuable tools that act as “truth machines” by leveraging the wisdom of the crowd. We believe this is just the starting point for Polymarket.
Disclaimer:
All data from November 21, 2022 to July 29, 2024.
“Election-related prediction markets” include markets identified by the ParaFi team and related to the results of the 2024 U.S. presidential election with a trading volume of more than $1 million. Non-election-related markets also include small markets related to politics.
A “user” is defined as the address of a person who places or takes orders on Polymarket.
