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Study finds Polymarket’s 5-minute Bitcoin markets can be manipulated

Researchers estimate about $1.3 million was transferred from retail traders to manipulators, and say extending contracts to 15 minutes largely eliminated the effect.

Reported · Written up by our desk · Market Structure

A study by researchers at Stanford University and Singapore Management University found that Polymarket’s five-minute Bitcoin prediction contracts can create incentives for settlement-price manipulation, with the risk concentrated around contract close.

According to Cointelegraph, the contracts settle based on Chainlink price feeds tied to Bitcoin’s spot price at the end of each five-minute window, which the study says encourages traders to influence the spot market immediately before settlement. The researchers analyzed trading activity around Polymarket’s launch of the contracts in July 2024, finding sharp increases in order flow just before settlement followed by rapid price reversals consistent with manipulation.

The paper estimated that the behavior transferred about $1.28 million from ordinary traders to manipulators during the sample period. The researchers said extending contract durations from five minutes to 15 minutes largely eliminated the effect.

The study also argued that prediction markets are not inherently vulnerable, pointing instead to settlement design as the key variable. It highlighted potential solutions such as longer settlement windows and alternative pricing methods like time-weighted average prices, adding that the design question could matter beyond crypto as prediction markets expand into regulated markets like those tied to event contracts.

Latest closeBitcoin $64,849.95 ▼0.2%

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