Study: 25% of Polymarket Volume Wash-Traded, Peaks at 90%
Columbia University researchers used blockchain analytics on Polygon data and network algorithms to trace millions of transactions across 1.26 million wallets. They found that wash trading accounted for about 25% of Polymarket’s volume since 2021, with spikes to 60% in December 2023 and surges above 90% during US elections and major sports events. The zero-fee, no-KYC structure and USDC settlements enable low-cost wash trading via sub-$0.01 bid-ask manipulations. Despite a $1.4 million CFTC fine and a US user ban, Polymarket plans a token airdrop tied to a $12–15 billion valuation and seeks regulated US re-entry with backing from the Intercontinental Exchange. Researchers urge algorithmic monitoring to exclude suspicious wallets, improve DeFi integrity, and ensure genuine liquidity on decentralized prediction markets.
Bearish
The study exposes significant wash trading on Polymarket, undermining trader confidence and questioning on-chain volume integrity. Short-term, this negative spotlight on DeFi market mechanics could deter liquidity and weigh on Polygon’s on-chain activity, driving a bearish reaction for MATIC. Long-term impact depends on the platform’s enforcement of algorithmic monitoring and regulatory compliance, but immediate sentiment is likely to remain cautious until genuine volume is restored.