LessWrong (Curated & Popular) "PSA: Predictions markets often have very low liquidity; be careful citing them." by Eye You
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Mar 20, 2026 A warning about treating tiny prediction markets as authoritative signals. Examples show how minimal volume can swing prices and mislead interpretations. The podcast inspects specific markets around an Anthropic designation and highlights play-money platforms and thin order books. The core takeaway: always check liquidity, spreads, and recent trades before citing market odds.
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Always Check Market Liquidity Before Citing Prices
- Check prediction market liquidity and spreads before citing their prices.
- Ihor Kendiukhov shows Scott Alexander citing Ventules and Polymarket prices as if they were reliable without checking order book depth.
Scott Alexander's Anthropic Market Example
- Scott Alexander used Ventules and Polymarket prices to argue Anthropic's valuation reaction to a Pentagon designation.
- Ihor describes Ventules' perpetual future and Polymarket shifts from ~90% to ~76% then back toward ~83% around the event.
Play Money Markets Lack Predictive Incentives
- Play-money markets like Manifold lack incentives so they may not be accurate or efficient.
- Ihor emphasizes Manifold is play-money and the market showed almost no trading activity for days, undermining its signal value.
