Prediction markets are fun because they link to things that happen in the real world. In these markets, trades are made based on the different outcomes that an event can have. For example, you can buy shares that reflect what you feel about the next presidential election or how much it’s going to rain in a certain month. The prices of different shares are indicative of how likely the community thinks a certain event is.
It is only recently that we’ve begun to see how prediction markets can be a boon to the cryptocurrency trading practice. That’s thanks to the emergence of various platforms that accept cryptocurrencies and are built on the blockchain. There are various ways in which the mechanics of a prediction market can be used to make more as cryptocurrency trader. Here are a few.
Earn cryptocurrency without having to be a master trader
Yes, bitcoin’s value reached levels that nobody thought it would. And a lot of experts think that it’s going to sustain that ascent for a while. But that doesn’t necessarily mean you’re going to walk away with a huge earning as soon as you jump into cryptocurrency trading.
The truth is that bitcoin is still an extremely volatile store of value. The people who manage to make profits consistently are those who dedicate themselves to studying the market and risking generous amounts of money. Things get harder when you think about the hundreds of other cryptocurrencies out there and trying to figure out which ones to back and when.
In such a scenario, prediction markets are a great way to earn cryptocurrency without having to immerse yourself in the trading aspect of the industry. There are a number of platforms that let you earn coins or tokens by making predictions about all sorts of outcomes and events that have nothing to do with cryptocurrency. So such markets let you use existing knowledge to build up a store of crypto cash, which you can then parlay into a cryptocurrency trading career.
Become a better observer of the cryptocurrency market
There are now prediction platforms that focus specifically on the prices of cryptocurrencies. Players are put into groups and tasked with forecasting how the value of a certain cryptocurrency will move within a short period of time. Those who are able to outdo their peers in these competitions can earn money simply by making the most accurate predictions about future pricing patterns.
Such prediction platforms are an excellent way for young cryptocurrency traders to hone their ability to observe pricing patterns. These competitions challenge participants to test what they know about the cryptocurrency market. The results let you know where you stand, as well as what nuances you might have been missing before.
It also helps that success on prediction platforms doesn’t rely on the success of a cryptocurrency. You don’t have to worry about bitcoin’s value dropping suddenly or feel bad about having missed that spike in the price of Ripple. Players are rewarded for foretelling how the value of a currency will change over time, no matter whether that’s a positive or negative change.
Add a source for alpha signals
Traders of every kind are always looking for alpha signals as a way to make informed trading decisions. Signals are formed by aggregating the information that can be gleaned from many technical indicators. They can have the combined effect of telling you whether you should buy or sell a security or asset at a particular time.
Since cryptocurrency is so young, most experts are still figuring out how to generate trustworthy signals for it. The wild price swings make it hard to get a grip on whether you’re using the correct approach to make trading decisions. The emergence of prediction markets gives traders a novel way to tap into alpha signals.
Prediction markets can be used as a source for alpha signals because of the volume of predictions being made on them and the size of the community. Most platforms host a large number of users at different stages in their trading career. All of these people are creating data about what the future price of a cryptocurrency may be. If this flow information is aggregated, it can be used to gain an understanding about what the overall sentiment about a cryptocurrency is. This can be used to make better informed trading decisions, leading to more profits.