- D8X will provide leverage to Polymarket bettors.
- The planned tools are expected to give the platform a much-needed boost.
- Despite these benefits, some in the community have expressed concerns that this new tool could be disastrous.
2024 was undoubtedly a breakthrough year for Polygon-based prediction market Polymarket. During the US election cycle, the platform’s popularity went beyond cryptocurrencies and into the mainstream.
As interest in Polymarkets grows, Polygon zkEVM, OKX’s X Layer, and Arbitrum’s decentralized exchange D8X are looking to provide bettors with a way to leverage their positions and capitalize. Is this the missing feature in crypto’s killer app, or a recipe for disaster?
D8X is keeping an eye on Polymarket Puffs
Polymarket thrill seekers are getting ready for their adrenaline rush. On Wednesday, July 24, Polygon revealed that D8X is working on offering perpetual futures on Polymarket contracts through August 2024.
The idea is that D8X’s perpetual contracts will allow Polymarket bettors to more than double their bets or hedge their positions. At the same time, D8X claims that the futures market will help enhance the liquidity of the prediction market.
According to the team, leverage is what the current viral crypto sensation is missing. This is a view shared by 1confirmation founder Nick Tomaino in December 2023, who leaned towards leveraging things like points and tokens to attract more crypto native users to Polymarket. But not everyone believes it was a good idea.
A recipe for disaster?
Some members of the crypto community were quick to point out that the nature of prediction markets poses significant challenges for implementing futures trading. Among them was Defi Llama developer “0xngmi”, who responded to the D8X announcement by posting:
“They apply leverage to an asset that can instantly go to 0 on news (literally no bids along the way) and stay that way forever? + Most of these markets have no liquidity at all.”
Another X user, “unicorn,” echoed the sentiment, adding: “How on earth would leverage work?”
At the same time, Valio founder Karlis highlighted the risks of adding leverage to illiquid markets, warning of what he called “research gap risk.”
This view emerges because in a typical perpetual futures market, traders can usually manage their trades with a stop loss. However, in a prediction market, it can be difficult because the stock price can immediately fall to $1 or $0 depending on whether the prediction is correct or incorrect.
At the same time, prediction markets for obscure or niche events may not attract as much attention as the market for the outcome of the US election, and are therefore often illiquid. Adding leverage to these types of markets can often lead to price volatility that can cause market crashes.
In response to these concerns, D8X co-founder Kaspar Soter argued that adjustments would be made to take into account the nature of prediction markets.
He stressed that “the leverage will be there, although it will look different than how criminals leverage “regular” assets.”
On the other side
- Leverage functionality is not natively available on the Polymarket platform.
- It’s hard to say whether this feature will actually work until it’s released.
Why this matters
When properly implemented, the perpetual futures market for Polymarket contracts allows traders to execute sophisticated trading strategies to manage risk more effectively.
Read more about Polymarket:
What is Polymarket? Crypto’s Latest Killer App Explained
Take a look at how Polygon Labs is reinventing ZK.
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