What is Price Discovery?
Price discovery is the process by which markets determine the fair value of an asset—in prediction markets, this means finding the true probability of an event occurring.A prediction market price of 52¢ means the crowd estimates a 52% probability of that outcome.
How Prediction Markets Work
Binary Outcomes
Most prediction markets have two outcomes: YES and NO.
- YES price = probability event happens
- NO price = probability event doesn’t happen
- YES + NO = 100¢ (always)
Continuous Trading
Unlike polls, markets update continuously as new information arrives.Breaking news → Traders react → Prices adjust → New consensus
Skin in the Game
Traders put real money behind their beliefs. This incentivizes accuracy over signaling.Wrong predictions = Lost money = Motivation to get it right
Price Convergence Across Platforms
When multiple platforms list the same event, prices should theoretically be identical. In practice, they’re not.Why Prices Diverge
Information Asymmetry
Information Asymmetry
Different user bases have access to different information. Crypto traders on Polymarket may react faster to blockchain news. Traditional finance users on Kalshi may better predict Fed decisions.
Liquidity Differences
Liquidity Differences
More liquid markets have tighter spreads. A thin orderbook means prices can deviate more from “fair value.”
Regulatory Barriers
Regulatory Barriers
US users can’t easily access Polymarket. International users can’t use Kalshi. This fragments the trading pool.
Transaction Costs
Transaction Costs
Fees, gas costs, and withdrawal friction make arbitrage expensive for small traders.
The Arbitrage Opportunity
When prices diverge, arbitrageurs can profit:- Example Trade
- The Math
- Why It Persists
| Platform | ”Trump wins?” | Action |
|---|---|---|
| Polymarket | 52¢ | Buy YES |
| Kalshi | 55¢ | Sell YES (or buy NO at 45¢) |
How Matchr Helps
1. Surface Price Differences
We show you matched markets with current spreads:
2. Historical Price Tracking
See how prices have converged (or diverged) over time:3. Alert on Opportunities
Coming Soon: Get notified when spreads exceed your threshold.
Price Accuracy Research
Studies show prediction markets are highly accurate:| Study | Finding |
|---|---|
| Berg et al. (2008) | Iowa Electronic Markets predicted elections better than 74% of polls |
| Arrow et al. (2008) | Aggregated forecasts outperform individual experts |
| Polymarket 2024 | Called Trump victory while polls showed toss-up |
Why Markets Beat Polls
Real Stakes
Money on the line incentivizes truth over wishful thinking.
Continuous Updates
Markets adjust instantly. Polls are snapshots in time.
Diverse Information
Aggregates knowledge from traders with different expertise.
Self-Correcting
Mispricing creates profit opportunity, attracting corrective trades.
Reading Market Signals
Volume Spikes
High trading volume often precedes price moves. Someone knows something.Orderbook Depth
Large resting orders indicate strong conviction at price levels.Cross-Platform Divergence
When platforms disagree, one of them has better information. Find out which.Time Decay
As resolution approaches, prices move toward 0 or 100. Mid-range prices get squeezed out.Price Data in Matchr
Available Metrics
| Metric | Description |
|---|---|
current_price | Last traded price |
best_bid | Highest buy order |
best_ask | Lowest sell order |
mid_price | (bid + ask) / 2 |
volume_24h | Trading volume last 24 hours |
price_change_24h | Price movement last 24 hours |