10x Research attributed the divergence to retail chasing narratives while institutional markets focus on year-end profit protection.
- 10x Research identified mispricing in Bitcoin volatility between retail prediction markets and institutional options.
- It expects the divergence between retail and institutional markets to compress quickly after the Fed rate cut decision.
- The firm noted that prediction markets are still being treated largely as entertainment, creating an advantage for probability-focused traders.
Bitcoin (BTC) price volatility “may now be mispriced on Polymarket,” 10x Research said in a note on Wednesday, pointing to a widening gap between retail prediction markets and institutional options venues ahead of the Federal Reserve decision.
Bitcoin’s price recuperated to $92,930 in early morning trade, up 3% in the last 24 hours. On Stocktwits, retail sentiment around BTC remained at ‘neutral’ levels over the past day. Meanwhile, Ethereum (ETH), jumped more than 7% in the last 24 hours. ETH’s price was trading at around $3,345 on Wednesday, with retail sentiment on Stocktwits around the leading altcoin trending in ‘bullish’ territory over the past day.
10x Research said implied volatility on Deribit has already begun to roll over, while Polymarket flows reflect retail traders overpaying for the upside narrative. “As a result, an actionable spread has emerged in the last twelve hours, one that is unlikely to remain open once post-FOMC repricing accelerates,” it said in its note.
Bitcoin Price Prediction Market
Recent Polymarket pricing supports the claim of an increasingly narrow range. Bitcoin odds for the December 8–14 window are most concentrated around $96,000, with data implying a 53% probability that BTC finishes the period above that level. Traders see far less likelihood of a breakout – 13% place their odds at $100,000, 6% at $102,000, and just 4% at $104,000.
Downside brackets show similar moderation. The market assigns 28% odds to Bitcoin ending below $88,000, and only 13% think the apex cryptocurrency will dip to $86,000, while 9% peg their odds at $84,000. Volumes across the mid-range remain the deepest, reinforcing the analyst view that traders expect consolidation rather than a directional move.
Ethereum markets display stronger confidence. For the same week, Polymarket assigns 90% odds that ETH holds above $3,400, with 59% odds for $3,500 and 35% odds for $3,600. Only low single-digit probabilities appear at the $2,900 and $2,800 brackets.
Retail Vs. Institutional Dynamics
10x Research said that prediction markets, despite their rapid growth, remain driven by users who “treat them like entertainment,” creating structural edges for more disciplined traders who focus on probability and time-decay.
It noted that these patterns reflect a classic year-end dynamic where retail traders crowd the upside stories while institutional markets shift to protecting year-end gains, leaving prediction platforms temporarily out of sync with derivatives markets.
That gap has created an “actionable spread” that is unlikely to stay open after the Fed sets the final tone of the year, the analysts said.
Fed Rate Cut Meeting – The Final Catalyst
Traders are now watching for the FOMC decision later in the day, widely anticipated to be a 25-basis-point rate cut to ease labour market conditions. However, Federal Reserve Chair Jerome Powell had flagged earlier this month that the expectation of a rate cut should not be a “foregone conclusion.” CME’s Fed Watch Tool showed that markets are pricing in an 89.9% probability of a 25 basis-point rate cut.
Analysts expect that once the FOMC decision is released, the gap between retail prediction markets and institutional derivatives markets will quickly narrow.
Read also: What Is The Federal Open Market Committee And Why Is It Important?
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