Who Is Pricing the Future? Prediction Market Probabilities and the Information Game
When a prediction market shows that an event has a 60% chance of happening, what does that 60% actually mean?
Is it a result calculated by a statistical model? An expert's judgment? Or simply a price shaped by participants putting real money behind their views?
The most interesting part of prediction markets is that they turn expectations about the future into a tradable number. Prices continuously change as new information, capital, and market sentiment enter the market.
For traders, the real question is not simply:
“Will I be right?”
It is:
“Is this price reasonable? Has the market mispriced the event? And do I have an information edge?”
In this KTX Live session, KTX Market Department's Mia was joined by Iverson, Head of Prediction Markets at KTX, and Lucas, a seasoned prediction market trader, to discuss probability pricing, information asymmetry, liquidity, trading strategies, and risk management.
What Are Prediction Markets Actually Trading?
Iverson explained that a prediction market can be understood simply as a market where participants express their views on an uncertain future event by trading at the current market price.
The biggest difference from traditional spot and futures trading is what is being traded.
Spot trading focuses on the underlying asset. Futures trading focuses primarily on price movements. Prediction markets, meanwhile, focus on:
The probability of a future event occurring.
For example, if a prediction market is trading at 0.60, that price can be interpreted as the market's current implied probability of roughly 60%.
But Lucas emphasized an important distinction:
A 60% market price should not automatically be treated as the “true probability.”
The 60% is first and foremost a market price. It reflects the information, opinions, capital, and trading behavior of market participants at that moment.
If you believe an event has a fair probability of 75%, while the market is only pricing it at 60%, there may be a potential pricing discrepancy.
On the other hand, if you believe the fair probability is only 40% while the market is already trading at 70%, the fact that the event eventually happens does not necessarily mean buying at 70% was a good entry.
This is one of the key differences between prediction markets and simple betting.
60% Is Not the Final Answer — Price Is the Trade
According to the KTX Prediction Market product documentation, a correct outcome settles at 1 USDT, while an incorrect outcome settles at 0 USDT.
Therefore, a price of 0.60 does not mean a final 60% payout. It is the market price before settlement, and that price can change continuously.
This also means traders do not necessarily have to hold until the event is resolved.
For example, if you buy at 0.40 and the market later moves to 0.70 because of new information, you can potentially sell before settlement and realize the change in market price.
Lucas pointed out that this is what makes prediction markets different from simply “betting on an outcome.”
Prediction is only the first step. Trading ability also means knowing when to enter, when to exit, and whether the current price has already priced in the market consensus.
If an outcome has already reached 99.9%, even being correct may leave very little upside.
So the key question is not only:
“Is my prediction correct?”
but also:
“At what price am I making that prediction?”
The Real Opportunity Lies in the Gap Between Price and Probability
From Lucas's perspective, prediction markets are dynamic information markets.
Market prices do not automatically equal objective reality.
Different traders have different information, experiences, and interpretations of the same event. As these views enter the market, they are reflected in a continuously changing price.
Therefore, traders should not only ask:
“Will this event happen?”
They should also ask:
“Is the current market price underestimating or overestimating the probability of this event?”
This is also why prediction markets need participants with different views.
For example, if a market moves from 40 to 70, someone is willing to buy around 70, while another participant believes that 70 is already high enough to sell.
This interaction between opposing views creates continuous price discovery.
Iverson also noted that a healthy prediction market cannot rely entirely on the platform itself to provide liquidity. Sustainable price discovery requires enough participants with different opinions to enter the market.
What Makes a Market Worth Trading?
Not every event that can be predicted necessarily makes a good prediction market.
According to Iverson, one of the most important requirements is:
The outcome needs to be clear and have an identifiable settlement source.
For example, whether BTC reaches a certain price by a specific time, who wins a particular game, or whether a clearly defined public event occurs can all provide relatively clear settlement conditions.
But if an event takes one or two years—or even five years—to resolve, the situation becomes very different.
Long settlement periods can create challenges around market making, liquidity, participation, and capital efficiency.
Lucas added another perspective from the trader's side:
The event itself is only part of the equation. Traders also need to consider liquidity, trading volume, price, time to resolution, and information flow.
A market can be interesting but still not be attractive to trade if there are not enough participants.
Lucas therefore considers factors such as:
- Current trading volume
- Market liquidity
- Current price
- Time remaining until resolution
- New information entering the market
- Whether he has an information advantage in that particular field
In other words:
Not everything that can be predicted necessarily makes a good market. The goal is to find a market where the pricing itself is worth trading.
Why Does Liquidity Matter So Much?
Iverson highlighted liquidity as one of the most overlooked aspects of prediction markets.
Users can explore market activity and liquidity through the KTX Market page.
Imagine a market with only $5,000 in available liquidity. If a single $5,000 order suddenly enters, it could consume multiple levels of the order book and cause the market price to move sharply.
A relatively quiet market can therefore become highly volatile when an event suddenly attracts attention.
This is why event heat and liquidity are closely connected.
BTC is a clear example.
Because BTC is widely followed and has a large number of market participants, there is generally a much broader pool of traders who understand the asset and are willing to buy or sell.
By contrast, an extremely niche event may have a clearly defined outcome but still struggle to attract enough participants.
For Lucas, market depth and execution conditions are therefore important parts of the decision-making process.
The question is not only:
“Does this price look attractive?”
It is also:
“Can I enter at a reasonable price, and can I exit efficiently if my view changes?”
The Core Advantage of Prediction Markets: Information
If prediction markets are about probabilities on the surface, they are ultimately also about information.
Different participants know different things.
Some traders understand the NBA. Others specialize in Crypto, macroeconomics, AI, or technology.
If everyone had exactly the same information, prices would quickly converge and there would be fewer opportunities for disagreement.
That is why Lucas places significant importance on domain-specific knowledge.
When trading sports markets, for example, he does not simply buy a market because it is popular or highly liquid.
If he does not understand the teams, players, or context, high liquidity alone does not give him an edge.
In simple terms:
Liquidity determines whether you can trade efficiently. Information determines whether you may have a reason to trade.
Trading Ability Can Matter More Than Prediction Ability
This was another important point from the AMA.
Suppose an outcome eventually happens, but you entered when the market was already pricing it at 99%.
Even if your prediction is correct, the remaining price upside is extremely limited.
On the other hand, if the market is pricing an outcome at only 10%, but your research leads you to believe its actual probability is significantly higher, the lower entry price creates a much larger potential price range.
Iverson shared a similar example from NBA Finals prediction markets.
At one point, one team could be priced around 90%, while the other was around 10%.
But sports markets can change rapidly.
If the game suddenly turns around, the 10% outcome can move dramatically higher.
For traders, the important question is therefore not simply:
“Who will eventually win?”
It is:
“Has the new information changed the logic behind my position?”
Lucas also emphasized that prediction market traders do not necessarily need to hold until final settlement.
If the market reaches a target price, or if new information invalidates the original thesis, a trader may choose to exit earlier.
This makes prediction markets closer to dynamic trading than a one-time wager.
Why Do Short-Term Events Attract Traders?
Iverson personally prefers short-duration events, including 5-minute or 15-minute BTC prediction markets and sports events that resolve within a few hours.
The reason is straightforward:
The closer an event is to resolution, the faster information changes can be reflected in the market.
For traders, short-duration markets can offer:
Faster feedback, faster price discovery, and clearer resolution.
Lucas also considers time to resolution when screening markets.
A market that takes years to settle can tie up capital for a long period while introducing additional uncertainty around liquidity and future information.
For beginners, starting with familiar, clearly defined, shorter-duration markets can therefore be a more straightforward way to understand how prediction markets work.
One of the Most Overlooked Risks: Settlement Rules
If there is one issue that users often overlook, Iverson believes it is:
Settlement rules.
Many users immediately focus on:
“YES or NO?”
“Which side has the higher probability?”
But the final outcome depends on the settlement conditions defined by the market.
For example, Crypto prediction markets may use a designated official price index for settlement, while sports markets may rely on official event results or designated data sources.
Special situations such as postponements, interruptions, or cancellations are also handled according to the specific rules of the market.
The KTX Prediction Market FAQ provides further details on trading and settlement mechanisms.
Before entering a market, users should therefore look beyond the displayed probability and ask:
How exactly is this market settled? What qualifies as YES? What qualifies as NO? What happens if the event is postponed, canceled, or interrupted?
Understanding the settlement rules is an essential part of understanding the trade itself.
Why Are Crypto and Prediction Markets a Natural Fit?
Crypto and prediction markets have a natural connection.
Crypto is already a highly real-time, information-driven market.
BTC, ETH, and SOL all have observable market prices, continuous information flows, and clearly defined time points, making them suitable for short-duration prediction markets.
KTX's Prediction Market currently covers Crypto price predictions as well as sports-related events.
For users who are already familiar with Crypto, BTC UP/DOWN markets can be a relatively intuitive starting point.
Users who want to trade BTC directly can also explore KTX BTC/USDT Spot Trading, while traders who are already familiar with derivatives can explore KTX BTC/USDT Perpetual Futures.
The difference is that Prediction Market introduces another dimension of trading:
Instead of asking only:
“Where will the asset price go?”
you can also ask:
“Will a specific event happen?”
This is why Iverson recommends that new users start with markets they already understand.
BTC and other Crypto markets can provide a natural starting point before moving into areas such as the NBA, esports, or other familiar events.
Prediction Markets vs. Spot and Futures
The differences become clearer when the three are placed side by side.
Spot trading: focuses on the underlying asset, such as BTC/USDT.
Futures trading: primarily focuses on asset price movements and may involve leverage and liquidation risk.
Prediction Market: focuses on the probability and final outcome of a future event.
KTX Prediction Market does not use leverage and does not have traditional futures-style liquidation. The maximum loss is generally limited to the amount invested, while positions can also be sold before settlement.
However, this does not mean there is no risk.
Price volatility, insufficient liquidity, information asymmetry, and settlement rules can all affect the final outcome.
For users already familiar with KTX Spot and Futures, Prediction Market can be viewed as another trading dimension:
From trading where an asset's price may go to trading whether a future event will happen.
From “Predicting the Future” to “Trading the Future”
The biggest takeaway from this AMA is that Prediction Market can be understood as much more than simple prediction.
Iverson approaches the topic from the perspective of product and market development:
What events are suitable for prediction markets?
How should settlement rules be designed?
How can liquidity be maintained?
How can more users participate?
Lucas approaches the same market from the perspective of a trader:
Is this price reasonable?
Is there a pricing discrepancy?
Do I have an information advantage?
Is the liquidity sufficient?
When should I enter?
When should I exit?
These two perspectives ultimately lead to the same question:
Who is pricing the future?
The answer is not a single person.
It is the market itself.
Every participant contributes information, capital, opinions, and expectations through buying and selling. Those interactions continuously create and update a market price.
That is what makes Prediction Markets so interesting.
They do not tell you exactly what will happen in the future.
Instead, they turn the market's current collective expectations into a number that can be traded, changed, and repriced.
For newcomers, the goal should not simply be to “guess correctly.”
Start by understanding three concepts:
Probability. Price. Information.
Once you begin asking:
“Why is this market priced at 60%?”
“Who is buying?”
“Who is selling?”
“Has the latest information already been priced in?”
you are beginning to understand the real logic behind Prediction Markets.
Explore more trading products and market information through the KTX official website.
Risk Disclaimer: Prediction markets involve market risk, price volatility risk, liquidity risk, information asymmetry risk, and settlement-related risk. A correct prediction does not guarantee a profit. Users should carefully review the specific market rules and make independent decisions based on their own risk tolerance. This article is a summary of the KTX Live discussion and does not constitute investment advice.