Power traders say online betting platforms are directly driving the global oil market as they rely heavily on unpredictable markets to secure multi-million dollar trades.
Market experts said that datafeeds from forecasting platforms such as Polymarket are used to create algorithms that influence trades in the global Brent crude futures market.
Polymarket’s “extensive” use of oil futures trading has emerged amid concerns that anonymous account holders may be using insider knowledge to place bets.
Energy traders have raised concerns that the platform could also be used to influence global oil market prices.
One energy trader said that Polymarket has become an excellent predictor of the direction of the oil market since the US-Israel war with Iran caused a global oil crisis, making it an important part of the algorithms used to determine the trade.
“We have seen very big games going on minutes before the big announcement. The theory is that someone inside loaded their crypto account to make a quick buck with a bet,” the trader said.
Polymarket’s growing influence on oil prices means betting by a small number of anonymous users can play a big role in influencing the oil market – where huge financial windfalls can occur.
Ajay Parmar, head of oil trading at ICIS, a market intelligence agency, said betting platforms are “increasingly influential in many markets now” and this will “become more of an issue going forward”.
“Betting markets have a long history of strong predictive accuracy and as Polymarket continues to rise, traders are increasingly turning to it for market signals,” said Parmar.
Tim Skirrow, who is a long-time oil trader and head of derivatives at market intelligence company Energy Aspects, also confirmed the adoption of forecast markets as a trading tool. He said: “I believe. “Any data should be considered in the modern market. If it has alpha, it has alpha.”
Online betting platforms including Polymarket allow anonymous people to view the results of many real world events – from sports and weather to the progress of the war in Iran – using online cryptocurrency accounts. Unlike bookmakers, exchanges and futures markets scramble buyers.
The US investment bank Goldman Sachs, one of the world’s leading oil price forecasters, has included an analysis of market forecasts in its oil market research that it shares with investors and customers to help shape their business strategy.
In addition, the most important exchange for trading Brent crude futures, the Intercontinental Exchange (ICE), launched a trading tool that provides a data feed of Polymarket’s forecasting markets to help traders “consume the analysis of opportunities of many people” as “market signals”.
Energy market traders said that the growing links between the forecasting platform and the global oil market could increase the influence of betting within global markets, or even encourage betting behavior that seeks to influence the broader energy commodity markets.
In some cases, a small number of Polymarket users bet heavily during the US-Israel war in Iran, and in the following weeks, experts say they seem to show signs of insider knowledge.
This data is used to inform algorithmic trading systems that in the past focused on data from news organizations and social media to create price signals for market trading.
In some cases, betting appears to have caused excessive trading in the oil futures market, resulting in sharp price swings that could disrupt a market position.
ICE launched its Polymarket data tool just weeks before the Iran war began. The owner of the New York Stock Exchange agreed to invest $2bn (£1.5bn) in Polymarket last October in a deal that valued the platform at around $9bn. It said it has pumped $600m into the platform in recent weeks.
However, not all traders are convinced by Polymarket’s report of predicting the next market moving event. “Polymarket has made some bad calls during this crisis,” said one business analyst at a leading energy company. “I think this is something that hedge funds are interested in, but that’s not how we make decisions here.”
Polymarket and ICE have been contacted for comment.
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