[Analysis] Only 3% Lead Polymarket Price Discovery... The Truth Behind the 'Wisdom of the Crowd'

Polymarket has been praised for its higher prediction accuracy compared to traditional opinion polls, but a new working paper released on April 26, 2026, suggests that this accuracy is not a collective achievement of the masses. According to the study, only 3% of all accounts play a key role in price discovery, showing that a highly skilled elite minority is driving the market narrative. The remaining 97% of participants are essentially providing liquidity to the market, serving to support the profits of the few.

An analysis of Polymarket's price discovery dynamics shows that skilled traders represent a small minority of 3%, while the vast majority provide the funds for their profits.

This study analyzed all transaction data on Polymarket from 2023 to 2025. The researchers confirmed that the 'price discovery' process—which moves market prices closer to the final outcome before a specific event actually occurs—is concentrated in a small number of accounts. This suggests that, contrary to the conventional label of 'wisdom of the crowd,' it is actually the 'wisdom of the few' that drives market efficiency.

Profitability Gap: Why 84% of Traders are in the Red

The economic report cards of market participants show an even sharper contrast. According to data from KuCoin and BitKE, 84.1% of the 2.5 million wallet addresses on the platform are in a loss state. Conversely, about 840 addresses, representing only 0.033% of the total, were found to monopolize most of the platform's total profits.

• Traders in loss: 84.1% of the total, accounting for the majority of 2.5 million wallets and providing market liquidity.
• Earners of $1,000+ per month: Only 1.25% of the total, representing a middle class with consistent earnings.
• Top earners (Whales): 0.033% (840 addresses) who monopolize massive profits within the platform.

This concentration of profit is closely related to Polymarket's technical structure, the hybrid decentralized Central Limit Order Book (CLOB). Polymarket strictly applies the rule '1 YES + 1 NO = $1,' which creates a zero-sum game structure where one person's win must lead to another's loss. Ultimately, there is a structural limitation where the losses of general individual investors are converted into the profit source for professional traders.

Nevertheless, Polymarket's prediction accuracy remains unrivaled. During the 2024 U.S. presidential election, Polymarket correctly predicted the results of 49 out of 50 states, an achievement that overwhelmed traditional polls, which showed errors of 3 to 5 percentage points in swing states. This high accuracy is paradoxically interpreted as the result of the information and analytical power of the 3% elite traders being immediately reflected in market prices.

Risks of Centralization and the Future of the Market

As the dominance of the few grows, concerns about market manipulation are also being raised. According to an analysis by Fensory, the risk of manipulation through sophisticated attack strategies rises sharply in markets where trading volume exceeds $1 million. In fact, disputes regarding outcome determination occurred in about 3.4% of the total market, which is analyzed to stem mainly from attempts by skilled traders to exploit ambiguous market rules.

Polymarket is now evolving beyond a simple speculative platform into a professional financial arena. CoinRank diagnosed that users have begun to use Polymarket as a 'hedging tool' against political and regulatory uncertainty, rather than just gambling. Amidst this trend of institutionalization, individual investors will need to take a more cautious approach, recognizing the information asymmetry with the elite minority.

In conclusion, it has been proven that Polymarket's success is based on the analytical power of a few experts rather than mass participation. For prediction markets to gain approval from regulatory authorities and be incorporated into the mainstream financial system in the future, addressing this profit imbalance and the possibility of market manipulation is expected to be a key challenge.