Polymarket up/down crypto markets — what actually has edge (honest findings)
Companion to the polymarket-updown-microstructure dataset. 2026-06-25.
This is a negative-results report, written to the standard that matters on an
efficient venue: every edge claim is graded against the price you could actually
transact at, not win-rate. On a market where the ask already encodes P(win),
a high win-rate is not edge — edge_real = realized_WR − avg_price_paid is.
TL;DR
Across an exhaustive search of taker signals, a full physics-regional sweep of the maker side, an active cancel-race simulation, and replication against two independent external corpora, no signal-based strategy clears the realizable bar — taker or maker, passive or active. The informed flow leads the settlement oracle, so even a perfect, zero-latency oracle-based maker cancel does not help. What edge exists on this venue belongs to actors racing inside the inter-trade gap on non-public signals; it is not reachable from price/oracle data, at any latency we measured.
1. Method
- edge_real =
(won ? 1 : 0) − price_paid, per fill, bootstrap-CI'd. - Realizable (fillable) lens: a backtest "fill" counts only if a real trade print corroborates it (tape) or the quote survives our measured latency (persistence). Paper-fills at the displayed quote overstate edge ~10× via fill self-selection (you fill the losers, get rejected on the winners).
- Ground-truth resolution from the settlement oracle, never from spot capture.
- Calibration anchor: a strategy with a known live
edge_real ≈ −0.004reproduces to that value under the lens before any verdict is trusted.
2. Taker side — closed
An exhaustive grid (5,161 configurations: entry-timing × price-band × move × fade/decisive, across BTC/ETH/SOL/XRP, 5m/15m) graded on the realizable lens, then an adversarial verification stage (pooled-CI + persistence-agreement + date-holdout OOS):
- The overfit cells evaporate under pooling (a family at +0.12 on n≈50 per cell is −0.017 pooled to n=1752).
- Most apparent survivors die on persistence-vs-tape disagreement (tape says +, the resting book says −: the fills are phantom/adverse).
- Exactly one configuration survived the full gauntlet, and it was carried entirely by a single coin at n=63 — a pocket, not an edge — and fires ~1×/day (economically negligible even if real).
Live confirmation: every directional taker we shipped died live (momentum, entropy,
velrider, flip), each time because the backtest measured corr(signal, observed price) while live fills self-select into the losing side.
3. Maker side — no physics region
The passive (post-and-rest) maker, simulated against the real trade tape (same adverse selection a live maker eats), across 17 physics regions (favorite/underdog × distance-to-strike in bps × realized-σ × seconds-to-close):
| region (favorite) | bid | P(win | fill) | gap | edge_real |
|---|---|---|---|---|
| dist <20bp, ≤60s | 0.957 | 85.4% | −10pp | −0.089 |
| dist <10bp, ≤60s | 0.904 | 70.8% | −20pp | −0.179 |
| dist <5bp, ≤60s | 0.704 | 44.2% | −26pp | −0.227 |
Zero of 17 regions are positive. A resting bid always fills ~10–20pp below its true win probability — you are filled precisely when price is moving against you. The rebate (hundredths of a cent) cannot close a 10–20pp gap. This holds near and far from strike, early and late.
4. The cancel race — also closed
The passive maker is adversely selected everywhere, so the active maker's hope is to
cancel an about-to-be-adverse quote before the informed taker hits it. We simulated
exactly that on the microsecond book-delta firehose: post the favorite bid, fire a
cancel when the oracle-fair drops below the bid, and let the cancel land L ms later.
Sweeping L from 0 (perfect) to ∞ (never cancel):
| cancel latency | edge_real | $ROI |
|---|---|---|
| 0 ms (perfect) | −0.1898 | −42.4% |
| 190 ms (ours) | −0.1897 | −42.3% |
| ∞ (never cancel) | −0.1894 | −42.3% |
The cancel does nothing — not even at 0 ms. This is not a "we lose the latency race" result; it is sharper. The cancel signal fires too late: the informed taker hits the bid before the data-streams oracle reflects the move. The adverse flow leads the oracle, so no oracle-based cancel can help at any latency. The only untested variant is a flow-based cancel (detect the informed taker mid-arrival and pull within the inter-trade gap) — which is the same sub-latency race a live attempt already lost. Maker is closed: passive (no region) and active (cancel useless).
5. External replication (independent corpora)
- Academic ("Who Wins and Who Loses in Prediction Markets", 588M trades): ~70% of users lose; winners provide liquidity with limit orders, losers take liquidity with market orders; only ~12% of top winners beat a coin-flip benchmark and ~60% of "lucky winners" become losers out-of-sample.
- Other people's bots (a public arena of 4.77M paper trades, gamma-resolved):
taker
edge_real −0.031/ ROI −6.0%; maker−0.136/ ROI −8.9%. Even the maker families with positiveedge_realstill lose on realized ROI once fees and early exits are counted.
Both land where our own data does: the taker space is closed; the maker space only opens on execution speed.
6. Takeaway for anyone using this dataset
Grade against the transactable price. If you find a +edge in a backtest here, before believing it: (1) pool across coins to kill multiple-comparison luck, (2) require the persistence lens to agree with the tape lens, (3) hold out by date, (4) check it isn't a once-a-day pocket. We did, on everything, and the honest answer is that the signal is already in the price.