Five and 15-minute Bitcoin (CRYPTO: BTC) prediction market contracts are attracting roughly $70 million in daily trading volume across Polymarket and Kalshi as retail traders use AI chatbots to scrape price data and generate odds for ultra-short-term bets.
The AI Trading Strategy
The Financial Times reported on Friday that Max Wojcik, a 29-year-old engineer, feeds weeks of Bitcoin price data into three AI chatbots—Claude, Gemini and ChatGPT.
He has the chatbots analyze the data together and calculate his probability of winning before he places any five-minute trades.
“Claude is my major brain right now, but I’m still manually placing the trades,” Wojcik said.
The engineer claims to have doubled his money over the past two months using this AI-assisted approach.
Traders flocking to short-term crypto forwards on Kalshi and Polymarket are presented with dashboards showing real-time prices fluctuating around a “price to beat” as a clock counts down toward the end of the contract.
The $70M Daily Volume Surge
Both platforms began offering 15-minute “up-down” bets on Bitcoin, Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL) and XRP (CRYPTO: XRP) late last year.
Polymarket has since added five-minute bets on the same tokens.
These contracts now represent more than half of all crypto trading on both markets. Their growth has created new inefficiencies that sophisticated traders have jumped on, according to Amir Hajian, a researcher at crypto market-maker Keyrock.
“Let’s just call it what it is: these instruments are pure speculation,” Hajian said, noting that ultra-short-duration options were proving particularly popular with retail traders.
The High-Frequency Trading Angle
Latency arbitrage had been “rampant” on 15-minute markets before Polymarket introduced a fee last month, Hajian said.
Sophisticated traders can take advantage of the tiny amounts of time it takes price signals from one exchange to reach another, in this case between Polymarket and crypto exchange Binance.
Large trading firms have continued to target “microstructure inefficiencies” between Polymarket and other exchanges, particularly in five-minute markets.
Unlike Kalshi, Polymarket does not charge fees on most contracts but added per-trade fees to its 15-minute crypto bets in January.
The company has since announced an expansion of fees of up to 1.56% to all crypto contracts to deter bot-driven arbitrage trading.
The Regulatory View
CFTC Chair Mike Selig has repeatedly voiced his support for prediction markets, saying last month that event contracts allow investors to hedge risk and manage their wider portfolios.
“Prediction market platforms have managed to take a speculative asset and inject even more mania into its trading,” said Amanda Fischer, policy director at investor advocacy group Better Markets and former chief of staff at the SEC.
The Mainstream Adoption
Nasdaq this week filed proposals with U.S. regulators to introduce binary “yes-no” options on whether the tech-heavy Nasdaq 100 index will trade “at, above or below” a predetermined price.
If approved, Nasdaq’s first “outcome-related options” will expire over a few days, with the exchange potentially considering “zero-day” alternatives with maturity of 24 hours or less.
Image: Shutterstock
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