Behind $1 billion in trading volume: Polymarket from on-chain data

Author: ParaFi Capital; Compiler: 0xxz@黄金财经

Given Polymarket’s recent explosive growth, the ParaFi team has been analyzing on-chain data to understand two key questions:

1) What factors have driven Polymarket’s recent traction?

2) To what extent is Polymarket’s growth driven by the US election?

For background, ParaFi has been researching and investing in prediction markets since 2018. Today, ParaFi is Polymarket’s largest single investor, having invested in its 2020 seed round and doubling down in the years that followed.

With the 2024 US election approaching, Polymarket's trading volume so far this year has reached US$688 million (Note: the latest data has exceeded US$1 billion), and weekly active users have increased by about 14 times, from about 1,400 to more than 20,000.

However, trading volume is only part of the story. There is more to be revealed.

Polymarket website traffic

Polymarket is widely regarded as a "source of truth" for real-time understanding of the world's most critical events, and has been cited by presidential candidates and media such as Bloomberg and the Wall Street Journal.

Polymarket.com's web traffic has grown exponentially. Daily page views have increased 10-fold over the past 12 months, with cumulative page views exceeding 32 million. Daily page views peaked at 1.3 million in the second half of July, with daily visitors peaking at 185,000.

Through this data, we can see that the number of people visiting Polymarket.com is several orders of magnitude higher than the number of users who actually trade. The popularity of Polymarket shows that the platform is becoming a powerful alternative to traditional media.

Is the election the only factor driving the popularity of Polymarket?

Not exactly. Of the nearly 70,000 addresses that have used Polymarket, only 42% chose election-related markets for their first trade. The remaining 58% (about 40,000 users) initially traded in non-election markets, including cultural, business, scientific, and macro markets.

Some of our favorite markets include: Olympic medal count, Taylor Swift engagement timeline, and GPT-5 release date.

While initial trading activity was more balanced, more than 70% of daily volume in U.S. dollar terms has been associated with election-related markets in recent weeks. This is not surprising given the proximity and volatility of events around the election.

But other markets have also managed to capture the public’s attention. For example, in May 2024, a surge in non-election-related trading volume was driven by the Ethereum ETF approval market, which saw cumulative trading volume of more than $13 million.

Trading volumes in non-election-related markets have also grown significantly this year, up 391% year to date.

Of the more than 28,000 users who placed bets in election-related markets for the first time, 56% subsequently traded in other markets.

Basically, almost half of the users who traded in election-related markets for the first time turned to markets covering topics such as economy, sports and cryptocurrencies.

Polymarket retention rate

The quarterly retention rates of different groups are another proof that users stay on the platform. At least 15% of the users who joined the platform in the first quarter of 2023 used the platform in each subsequent quarter.

Perhaps more importantly, retention has not dropped dramatically as the quarters have gone on. So far, the Q1 2023 cohort has returned in roughly the same proportion in Q3 2023 as it did in Q3 2024.

With the hype surrounding election-related trading, retention has actually improved slightly in recent quarters as traders from the early cohorts have been motivated to return to the platform.

Retention is also much higher for the more recent cohorts. More than 45% of users who made their first trade on Polymarket in Q1 2024 traded in the following quarter, compared to only 25% of users who made their first trade in Q1 2023.

Matched Trade Volume Soars

Trading volume is only part of the picture for overall trading activity. Consistent with the trends we’ve seen in terms of transaction value and number of users, the number of matched trades on Polymarket has also soared in the past few months. Since the beginning of the year, daily matched trade volume has jumped more than 3,000%, exceeding 40,000 at the end of July.

The increase in the number of matched trades isn’t shocking given the rise in other metrics, but it does suggest that the growth in volume isn’t just due to users betting higher amounts. The volume that Polymarket actually facilitates is also climbing.

It’s also worth noting that the recent trend of daily matched trades divided by daily active users has been rising. While this trend has fluctuated so far this year, the ratio suggests that, on average, users are more engaged with the platform every day.

Super users are less dominant

Based on the volume data, super users don’t necessarily dominate the platform.

We define super users as those who trade at least $250,000 per day. In Q1 and Q2 2024, super users accounted for an average of 51% of daily trading volume. But their market share has been declining recently as Polymarket's user base shifts toward smaller traders.

Others

The ParaFi team is excited to continue watching and working with Polymarket in the coming years. We believe that prediction markets are a valuable tool for humanity - acting as "truth machines" by leveraging the wisdom of the crowd. Our sense is that this is just the beginning for Polymarket.

Disclaimer: All data is based on the Polymarket central limit order book from November 21, 2022 to July 29, 2024 (excluding automated market maker data).

Election-related markets cover sizable ($1M+ volume) markets identified by the ParaFi team as relevant to the outcome of the 2024 U.S. presidential election. Non-election-related markets do include smaller markets related to politics.

A “user” is defined as the address of any market maker or taker of an order on Polymarket. While all queries used in this article were developed by the ParaFi team, we appreciate the existing Dune dashboard created by @richardchen3 and @/lifewillbeokay for useful inspiration.

The above is for reference only. It should not be considered investment advice.