Rebeca Moen Oct 12, 2024 15:00
dYdX launches prediction markets with up to 20x leverage on its chain through integration with Polymarket, offering new speculative opportunities.
dYdX, a decentralized trading platform, has announced the integration of prediction markets with leverage on its chain, in collaboration with Polymarket. This new feature allows users to speculate on real-world events with up to 20x leverage, according to dYdX.
Understanding Polymarket
Polymarket is a platform where users can bet on the outcomes of various real-world events. Each market offers a binary option of ‘yes’ or ‘no,’ and users can purchase shares based on their predictions. The market resolves to $1 or $0 depending on the outcome. For instance, in a market predicting if Simone Biles would win a gold medal, a ‘yes’ share would become $1 if she won, while a ‘no’ share would fall to $0.
Limitations of Traditional Prediction Markets
While Polymarket has opened new avenues for speculation, the financial upside is limited. Shares can only be sold for a maximum of $1, which restricts the potential returns even if the initial investment was minimal.
Enhanced Opportunities with dYdX Prediction Markets
With the introduction of prediction markets on the dYdX Chain, users can now engage in trading Polymarket’s prediction markets with significant leverage. This feature enables users to long or short with up to 20x leverage, potentially increasing the upside or downside.
The dYdX Chain will track only the price of ‘yes’ shares. A long position corresponds to a ‘yes’ bet, while a short position equates to a ‘no’ bet. Currently, the software supports prediction markets on isolated margin with a maximum leverage of 20x.
This move marks dYdX Chain’s initial expansion into new asset categories, aiming to establish itself as a comprehensive platform for both on-chain and off-chain markets.
Technical and Regulatory Considerations
dYdX emphasizes that while they provide open-source software, they do not operate the dYdX Chain for public use. The integration with Polymarket utilizes public open-source API endpoints. Traders interested in deploying these markets are advised to comply with local regulations and seek professional advice as needed.
Notably, dYdX services and products remain unavailable to residents or entities from the United States, Canada, and other restricted regions.
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