Prediction market volume is exploding, but open interest isn't following. The root cause: volume numbers are being inflated. Paradigm's research shows that almost every major dashboard double‐counts Polymarket's volume, making the nominal trading volume appear twice as high as it really is.
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Step 1: Understand What Volume and Open Interest Actually Mean
Let's break these two metrics apart so you can see why they disconnect.
Trading Volume: The total amount of money traded over a specific period. In prediction markets, it tracks the flow of share buying and selling.
Open Interest (OI): The total amount of unsettled positions at a specific moment. It represents "money sitting in the market," not money that just passed through.
High volume only tells you money is moving fast. Open interest tells you how much capital has actually settled into the market.
Step 2: Check If Trading Volume Is Double‐Counted
This is the most critical step. If the volume data itself is watered down, then "volume growing while OI doesn't" is exactly what you should expect.
What's happening: Polymarket's on‐chain data contains redundant representations for every trade. When a trade happens, the system emits multiple OrderFilled events: one for the maker and another for the taker. These events describe the exact same trade, just from different angles.
The result: Many popular dashboards (including DefiLlama, Dune, and others) treat them as two separate trades and add them together. That means the same volume gets counted twice. Paradigm makes it clear: Polymarket's volume should be measured using a single‐side method (for example, count only the taker side or only the maker side). Summing all OrderFilled events is simply wrong. Paradigm also found that a simple YES token sale of $4.13 would be recorded as $8.26 in volume under the flawed approach.
Data comparison: Dune once reported that Polymarket's monthly volume hit $3.7 billion in November 2024. But if Paradigm's research is correct, that figure could be twice the actual number.
Step 3: Why Open Interest Still Isn't Rising
After removing the biggest source of inflation—the double counting—there are still two real reasons OI stays flat.
Reason 1: Too many short‐term markets; capital doesn't stick around On Polymarket, 67.7% of markets have a cycle shorter than 7 days, and a large share (22.9%) are ultra‑short‑term markets lasting less than 1 day. Among those ultra‑short markets, over 63% see zero 24‑hour trading volume, and average liquidity is below $100. The trading logic here is no different from meme coin PvP: money races in and out. Nobody wants to hold positions for long, so OI never accumulates.
Reason 2: OI concentrates in a few big events During the November 2024 US election, Polymarket's OI peaked at an all‑time high of $510 million. That shows real "settled money" only wants to stay in a handful of high‑certainty, long‑narrative events. A similar pattern appeared during the World Cup: Polymarket's soccer category saw trading volume jump 300%, but OI remained flat—no synchronized growth.
Common Pitfalls
Mistaking "high volume" for "deep liquidity": CNBC's analysis found that roughly 70% of closed markets on Polymarket had cumulative trading volume under $10,000, and nearly 5% had zero volume. In low‑liquidity markets, small amounts of capital can cause violent price swings, wide bid‑ask spreads, and higher trading costs.
Confusing "nominal volume" with "real capital inflow": The former can be blown up by how data is reported; only the latter will drive OI.
Risk warning: If you jump into prediction markets simply because you saw headlines about exploding volume, while ignoring OI and the actual liquidity depth of a specific market, you are likely to get hurt in a high‑slippage, bot‑driven environment. CNBC's analysis found that in shallow markets with under $10,000 in volume, over 80% of trading comes from bots.
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What to Do Next
How to verify: When judging a prediction market's real activity, look at both trading volume and open interest at the same time. If volume is rising but OI isn't, money is just cycling fast without settling. Prioritize markets with higher OI and tighter bid‑ask spreads.
Next steps: Before you enter any prediction market, check its 24‑hour volume and current OI. If OI is below $100,000, it's usually best to skip it. A resident trader interviewed by CNBC said they prefer high‑liquidity, short‑cycle markets because "capital efficiency is higher." Rather than chasing splashy volume numbers, focus on whether the money is actually staying put.
