Investor Nic Carter: predicts that the market is still immature, facing issues such as insider trading, market fragmentation, and a lack of natural buyers and sellers

PANews reported on February 22 that investor and Coin Metrics founder Nic Carter wrote about the current state of prediction markets, believing that although they may become a cultural phenomenon by 2025/26, there is still a significant gap compared to the potential envisioned by early supporters. He pointed out two major structural issues with prediction markets:

First, market fragmentation and the lack of natural buyers and sellers make it difficult for them to serve as effective hedging tools (the more favorable the market is to hedgers, the worse its liquidity becomes. For “corporate hedging” to function effectively, a large number of speculative noise traders need to short sell to effectively “subsidize” these short positions).

Second, part of the value of prediction markets lies in revealing insider information, but such activities are often illegal and may ultimately lead traders to lose confidence in the market.

Additionally, he mentioned that currently, prediction markets mainly rely on sports betting for survival. However, in non-sports sectors, insider trading scandals could trigger doubts about market fairness, ultimately leading to user attrition. Although prediction markets have social value, Carter believes that realizing the vision of early advocates still faces significant challenges, and in the future, they may focus more on sports and cultural markets.