The Battle for Market Dominance: Prediction Markets vs. Perpetual DEXs

Trading Platforms Clash: The Struggle for Market Dominance

By Asher, Odaily 星球日报

In a rapidly evolving financial landscape, two of the hottest trading sectors—Prediction Markets and Perpetual Decentralized Exchanges (Perp DEXs)—are increasingly encroaching on each other’s territories. Over the past six months, platforms like Polymarket and Kalshi have ventured into the realm of perpetual contracts, while Hyperliquid, a leader in Perp DEXs, has made strides into prediction markets. However, the results of these ambitious expansions have been less than stellar.

Hyperliquid’s Bold Move: A Rollercoaster Ride

In May, Hyperliquid launched its HIP-4 Outcome Markets, introducing a new dimension to its trading platform. The initial response was overwhelming, with a first-day trading volume of $6.15 million and over 54,000 trades. The excitement peaked during the World Cup, with active markets skyrocketing from a few dozen to over 120, and daily trading volumes hitting nearly $30 million.

Yet, this surge proved to be fleeting. As the World Cup progressed, the number of active markets plummeted from 125 to below 20, a staggering decline of over 85%. Trading volume followed suit, dipping below $1 million on several days. This downturn highlights a fundamental challenge: while perpetual contracts thrive on long-term liquidity, event contracts require constant influxes of fresh interest and capital.

Polymarket’s Perpetual Challenge

Polymarket, which entered the perpetual contract arena in April, initially saw promising results with a trading volume of approximately $48 million. However, by late July, this figure had dwindled to around $18.2 million. The platform’s current trading activity appears more reflective of early users testing a new product rather than establishing stable trading habits.

Despite being in an invite-only phase, Polymarket’s performance starkly contrasts with Hyperliquid’s robust trading figures. While Hyperliquid boasts an Open Interest (OI) of approximately $7.7 billion, Polymarket’s OI stands at a mere $26.4 million—just 0.3% of Hyperliquid’s.

Kalshi’s Rapid Rise and Fall

Kalshi’s foray into perpetual contracts was swift, amassing a cumulative trading volume of $16.1 billion within six weeks of launch. However, recent data indicates a sharp decline in trading activity, with daily volumes plummeting from $448 million to around $80 million in just a few days. This decline raises questions about Kalshi’s long-term viability in the competitive landscape.

While Kalshi’s U.S. compliance offers a unique advantage, it remains to be seen whether this will be enough to retain professional traders in the long run. The platform’s current OI remains in the tens of millions, a stark contrast to Hyperliquid’s substantial figures.

The Road Ahead: Home Turf vs. Expansion

The challenges faced by Hyperliquid, Polymarket, and Kalshi underscore the difficulty of replicating established user habits and liquidity. Hyperliquid’s users are accustomed to high-frequency trading, while Polymarket and Kalshi cater to those interested in sports and political events.

As these platforms navigate their cross-border expansions, focusing on deepening their existing markets may prove more beneficial than attempting to become an “Everything Exchange.” For Hyperliquid, enhancing its Perp and on-chain trading could be key, while Polymarket and Kalshi must prioritize event supply and liquidity.

In this competitive arena, success may not hinge on the breadth of offerings but rather on the ability to cultivate a loyal user base and robust liquidity in their core markets. As the battle for dominance continues, the platforms that can effectively defend their home turf may emerge as the true victors.