Galaxy Research released findings from an analysis of Polymarket's international platform showing that the majority of retail traders operate at a loss. The study examined 2.9 million wallets using the platform's full on-chain settlement record, with data curated by oracle network Stork.
According to the research, 69.2% of retail accounts finished below break-even, with those traders collectively sitting $338.9 million in the red. The median retail account showed losses of approximately $3, though larger losses appear concentrated in the distribution tails, with the bottom 1% of accounts losing at least $4,804.
Separating Retail From Automated Trading
Galaxy used a threshold of 50 orders per active day to distinguish retail traders from likely automated accounts. The firm acknowledged this cutoff as a judgment call, as trading frequency showed no natural break point. The filter removed 125,429 accounts responsible for 80.8% of all orders, which collectively finished $246.8 million ahead.
Trading Behavior After Losses
The data revealed patterns in trader behavior following losses. Within 30 days of a loss, 15.2% of accounts had not traded again, compared to 6.1% of accounts after a win. Galaxy cautioned that it cannot link multiple wallets to single individuals, so some apparent account inactivity may reflect traders switching to new addresses.
Performance Varies by Specialty
Galaxy classified 44.1% of traders as specialists, meaning more than 60% of their market activity concentrated in one topic. Among these specialists, sports traders comprised 47% of the group and showed the lowest profitability rate at 25.1%. In comparison, tech and science specialists reached 41.2% profitability, while generalists achieved 30.4%.
The findings align with earlier research, including a Yale study showing that 3% of Polymarket traders captured 27% of profits. BeInCrypto previously reported that approximately two-thirds of 194,000 addresses finished underwater on Polymarket's World Cup winner market.
Market Structure and Function
Galaxy noted that the results do not undermine prediction markets as forecasting tools. The firm suggested that a losing retail trader base may be structurally necessary, as informed traders require uninformed trading flow to operate profitably. Galaxy stated that Polymarket can function as both an unprofitable endeavor for most participants and a forecasting tool for nonparticipants simultaneously.
The report indicated that developments in the coming year may reveal whether the size or composition of the prediction market trader base shifts significantly.
