$500 becomes 323,000, 80 days 646x return: The arbitrage secret of Polymarket high-frequency traders

A certain address on Polymarket used 80 days of high-frequency trading to turn a $500 principal into $323,000, achieving a 646x return. This case draws attention not only to the numbers themselves but also to the revealing of an overlooked arbitrage mechanism in prediction markets: when the spot price has already completed its volatility but the odds in the prediction market have not yet reflected it in a timely manner, a brief window of price lag exists. Within this window, traders with the correct strategy can repeatedly arbitrage.

The Logic of High-Frequency Trading: Exploiting 15-Minute Windows

Core mechanism of the trading strategy

The operation method of this address appears simple but requires precise execution. It focuses on 15-minute micro-predictions of BTC and ETH price movements, placing hundreds of orders daily during periods when prices lag behind the spot, then closing positions within minutes after order book compression. Since early November, this address has executed over 19,000 trades.

The key to this strategy lies in the mismatch of three time windows:

• The spot market (CEX) completes its price movements
• Polymarket’s odds have not yet fully reflected this volatility
• Traders quickly open and close positions during this lag period

According to the latest information, the specific mechanisms exploited include: markets reset after certain events, periods of increased trading volume, and windows before odds fully reflect spot trends. In other words, when the market reopens a 15-minute prediction cycle, a time difference exists, within which profits can be made.

Why this strategy is feasible now

Relevant information shows that Polymarket’s platform size is rapidly expanding. By 2025, Polymarket’s monthly trading volume soared from less than $100 million at the beginning of the year to $13 billion. This increase in liquidity means:

• More participants entering, leading to more dispersed information
• Faster odds adjustments, but still with lag at the high-frequency level
• The order book depth is sufficient to support large orders from high-frequency traders

Additionally, prediction markets are undergoing institutional upgrades. According to related reports, traditional financial institutions (such as ICE, the parent company of NYSE) have made a $2 billion strategic investment in Polymarket, marking the entry of prediction markets into an “institutionalized” phase. This attracts more capital and traders but also introduces more information asymmetry and short-term arbitrage opportunities.

Reproducibility and Risk Assessment

How difficult is it to replicate this strategy

On the surface, 15-minute high-frequency trading seems broadly replicable. But in reality, several barriers exist:

• Stable API connections and ultra-low latency are required
• Deep understanding of the liquidity characteristics of specific Polymarket markets
• Sufficient capital to withstand volatility (though this case started with $500)
• Precise risk management, as 19,000 trades mean each must be risk-controlled

More importantly, the returns from this strategy will diminish as participation increases. As more people adopt the same approach, the lag window shrinks, and arbitrage opportunities disappear.

Concerns about regulation and insider trading

Related reports mention that U.S. Congressman Ritchie Torres is pushing the “2026 Financial Prediction Market Public Honesty Act,” aimed at combating insider trading in prediction markets. This is because there have been clear cases of insider trading on Polymarket: a certain account heavily bet on contracts hours before Venezuelan President Maduro’s arrest was announced, ultimately earning over $400,000 from an investment of $32,500.

The key difference is that the Maduro case involved insiders with non-public information, whereas this high-frequency trading case is based on arbitrage from market lag. However, as regulations tighten, prediction market platforms will strengthen oversight, and high-frequency strategies may face additional scrutiny.

Summary

This case reflects a characteristic of prediction markets as emerging financial infrastructure: in the process of rapid liquidity growth and participant diversification, short-term information asymmetry and price lag exist. The story of turning $500 into $323,000 is not luck but a precise capture of this micro-structural market feature.

However, it should be noted that such high-frequency arbitrage opportunities are gradually being eliminated. As Polymarket becomes more institutionalized, liquidity further increases, and regulatory frameworks improve, arbitrage spaces based on time differences will diminish. For most retail traders, participating in high-frequency trading involves high risks and barriers; blindly following such strategies may instead turn them into liquidity providers.