Comprehensive research on profitability, strategy, and risk management for market making in Polymarket's 5m/15m binary prediction markets (BTC, ETH, SOL).
| Market | Volume | Liquidity | Status |
|---|---|---|---|
| BTC 5m | $26.8M | $2.8M | Active |
| BTC 15m | $13.5M | $1.7M | Active |
| ETH 15m | $3.9M | $957K | Active |
| SOL 15m | $1.3M | $677K | Active |
Binary prediction markets where outcome depends on price direction over a fixed window.
Fair Value Model:
FV_UP = 0.50 + momentum_adj + mr_adj + flow_adj
Where:
• momentum_adj ∈ [-0.08, +0.08]
• mr_adj (RSI) ∈ [-0.03, +0.03]
• flow_adj (CVD) ∈ [-0.05, +0.05]
spread = base_spread × vol_mult × time_mult
• base_spread = 3%
• vol_mult = 1 + (vol - 0.10) × 5
• time_mult varies by window position
| Window Position | Time Mult |
|---|---|
| First 10% | 1.5× |
| Middle 80% | 1.0× |
| Last 10% | 2.5× |
| Limit | Value | Rationale |
|---|---|---|
| Per Market | 5,000 | Concentration risk |
| Total | 50,000 | Capital efficiency |
| Correlated | 20,000 | BTC exposure |
skew = (inventory / max_inventory) × 0.02
Max 2% skew at inventory limits
| Signal | Weight | Description | Advantage |
|---|---|---|---|
| 5m Momentum | 30% | Short-term trend continuation | High |
| 15m Momentum | 25% | Medium-term direction | High |
| RSI (14) | 15% | Mean reversion at extremes | Medium |
| CVD | 15% | Order flow imbalance | Medium |
| Vol Regime | 15% | Confidence adjustment | Variable |
Monte Carlo simulation of market making P&L based on strategy parameters.
Polymarket charges taker fees on Up/Down markets. Fees are highest at 50% probability.
fee = shares × price × 0.25 × (price × (1 - price))²
| Price | Trade Value | Fee | Effective % |
|---|---|---|---|
| $0.10 | $10 | $0.02 | 0.20% |
| $0.25 | $25 | $0.22 | 0.88% |
| $0.40 | $40 | $0.58 | 1.44% |
| $0.50 | $50 | $0.78 | 1.56% |
| $0.60 | $60 | $0.86 | 1.44% |
| $0.75 | $75 | $0.66 | 0.88% |
| $0.90 | $90 | $0.18 | 0.20% |
* Based on 1% avg fee rate and 20% rebate pool. Actual rebates depend on fee-curve weighting.
| Limit Type | Value | Action |
|---|---|---|
| Per Market | 5,000 shares | Stop quoting |
| Total Portfolio | 50,000 shares | Stop all |
| Correlated (BTC) | 20,000 shares | Reduce |
| Daily Loss | 2% of capital | Halt trading |
| Max Drawdown | 10% of capital | Review |
| Source | Risk | Mitigation |
|---|---|---|
| HFT Flow | High | Widen on rapid fills |
| Large Orders | Medium | Partial fill limits |
| News Events | High | Avoid scheduled events |
| Momentum | Medium | Captured in FV model |
| Scenario | Win Rate | Spread | Fill Rate | Monthly P&L | Sharpe |
|---|---|---|---|---|---|
| Pessimistic | 45% | 4% | 20% | +$8,200 | 0.8 |
| Base Case | 48% | 3% | 30% | +$18,420 | 1.4 |
| Optimistic | 51% | 2% | 40% | +$32,100 | 2.1 |