Polymarket Altering Resolution of Timed Crypto Markets in Quest to Damp Manipulation

In an effort to boost integrity and clamp down on potential manipulation, Polymarket is altering its resolution methodology for timed cryptocurrency markets.

The prediction market giant noted in an X post earlier today that it’s moving to time-weighted average price (TWAP) over a single final price to resolve timed up/down event contracts pertaining to seven cryptocurrencies. The timeframes affected by the move are five and 15 minutes and one hour. It’s possible that TWAP will provide a cleaner picture of what a digital asset’s behavior was over those time lines rather than relying on a single price. The TWAP methodology has long been applied in other areas of finance, particularly among institutional traders.

Polymarket, one of the world’s largest prediction market operators, is doling out $1 million in liquidity across the eight affected cryptocurrencies to highlight the shift to TWAP.

Why the TWAP Change Matters

Timed cryptocurrency markets on yes/no exchanges have caught flack in some circles and for a variety of reasons, but the issue of vulnerability to manipulation came to light in a recent, widely circulated paper published by researchers at the Stanford University and the Singapore Management University.

In simple terms, the researchers found that timed cryptocurrency markets were susceptible to manipulation by automated trading programs, noting that $8.2 million in wealth was transferred from unwitting retail traders to professional tech-backed platforms. The academics analyzed approximately 16,000 five-minute Bitcoin trades on Polymarket over two months, finding consistent examples of increased buying or selling activity in Bitcoin on Binance, a major cryptocurrency exchange, right before those contracts expired.

According to the academics, those trades adversely affected Polymarket clients and soon after the five-minute contracts resolved, there was evidence on Binance that the “offenders” were departing the market.

The researchers noted that the purported manipulation wasn’t as severe across 15- and 60-minute timed crypto contracts and they suggested the TWAP methodology as a way of potentially limiting the chicanery.

Smart Move By Polymarket

With cryptocurrency ranking as one of the most popular non-sports segments on prediction markets, operators such as Polymarket are incentivized to prioritize market integrity and show traders that they’re not chum for professional sharks.

Data confirm the importance of the Polymarket TWAP move. A report out last month indicates that as of mid-July, digital currency volume on all-or-nothing exchanges swelled 44x on a year-to-date basis.

The cryptocurrencies affected by the Polymarket change are Bitcoin, Ethereum, Solana, XRP, Hyperliquid, BNB and Dogecoin.