Prediction Markets: What They Are and How They Are Utilized

Explaining prediction markets, how they work, and what are their use cases

Filip Dimkovski
By Filip Dimkovski
Joel Taylor
Edited by Joel Taylor

Published April 30, 2022.

With rising instability all around the world and overall fear being widespread, people are looking for ways to stabilize their money or try to predict the way the market is headed. This is where prediction markets come in - prediction markets are collections of votes from people who speculate the market's future based on events, like lifestyle changes, political events, company sales, armed conflicts, etc.

What Is a Prediction Market?

Prediction markets are exchange-traded markets, and their primary goal is predicting the market & trading based on the outcome of future events. Even though they are quite simple in nature, prediction markets have proven to be quite effective as a tool for predicting the market. In fact, there have been multiple instances where prediction markets gave quite accurate outcomes. Thus, these markets can be used as a tool to take into consideration before opening a big position in the market.

How Are Prediction Markets Utilized?

Since markets represent a vast variety of thoughts and opinions from many people, their use cases are quite wide. In a prediction market, thousands of people with different values, educational backgrounds, and socioeconomic standings gather up to give their opinion.

Even though the initial idea of prediction markets was for them to be utilized on the stock & forex market, they've now become an incredibly useful tool for crypto investors. Thousands of reputable crypto platforms like CoinMarketCap and Gnosis have allowed this feature for all of their users. For example, anyone who is an ETH holder can vote and submit their opinion about the future price of ETH and the direction they believe it's headed.