A Columbia University study revealed 25% of Polymarket’s trading volume is due to wash trading, peaking at 60% in December 2024, raising questions about market integrity.
The findings cast doubt on prediction market reliability and Polymarket’s U.S. regulatory strategy, with concerns over inflated metrics impacting investor trust and regulatory oversight.
Columbia University’s study reveals that 25% of Polymarket’s trading volume is artificially inflated, with significant ramifications possible for POLY and ETH in case of regulatory scrutiny.
Polymarket’s Volume: 25% Inflated, Study Reveals
Columbia University’s recent study reports 25% of Polymarket’s trading volume is artificially inflated. Such activity spiked to 60% in December 2024, raising questions about the platform’s integrity as it plans a U.S. return and a POLY token airdrop.
Researchers Rajiv Sethi and Yash Kanoria identified this behavior, citing repetitive trade loops among linked wallets. No official statement from Polymarket addresses these findings. Shayne Coplan, Polymarket’s founder, previously highlighted product releases and token updates. Rajiv Sethi, Professor at Barnard College, stated, “Our findings suggest that wash trading is not only prevalent but significantly distorts the reported trading volumes.” Source
The study prompts financial implications on Polymarket and associated tokens, questioning trading volumes and credibility. ETH and POLY could face indirect impacts if regulatory scrutiny heightens. Market analysts are watching for possible regulatory responses.
Potential Regulatory Fallout for POLY and ETH
The report suggests potential regulatory or financial outcomes if faced with increased scrutiny. Existing functional claims, such as a platform usage of over $3 billion, may be reassessed for accuracy due to the identified wash trading activities. For further insights, you can follow RootDataCrypto’s Twitter profile for crypto insights.
Wash Trading Persists in 70% of Crypto Exchanges
Previous studies, like a 2022 Oxford research, found similar wash trading issues in 70% of unregulated crypto exchanges. The recurring problem underscores the vulnerabilities of prediction markets compared to non-blockchain counterparts like Kalshi.
Kanalcoin experts suggest long-term market volatility risks as a result of inflated trading behaviors. This scrutiny might deter investor confidence and impact upcoming Polymarket developments, reinforcing the need for transparency and tighter regulation.
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