What are Financial prediction markets?

What are Financial prediction markets?

Predicting. An innate human trait. Predictions are the basis for some of our even most trivial actions. In fact, it is time we move on from being called Homo Sapiens to Homo Predicens: the predicting man!

Analytical predictions are the professional backbone of analysts and brokers in the stock markets, commodities markets and all other financial markets. What separates prediction from guessing or betting is the knowledge, real, acquired or perceived. While prediction is weighing information, evaluating, and deriving a likely outcome, guessing or betting, on the other hand is selecting an outcome not based on knowledge. In reality, however, there is almost always a bit of both: predicting and guessing. At times, we think we are predicting which in fact is guessing, while in other cases we may be combining elements of guessing and predicting.

We make predictions all the time and commit resources to back them up. Like some invest in the stock market, predicting that it will rise or fall or voting in an election based on how this election would affect us and many more. Or, say we save money in a pension fund and buy insurance based on our prediction that the law of averages says something may happen.

Are Financial Derivatives the most attractive form of prediction markets?

For the advanced traders in financial markets, derivatives are the most attractive form of prediction markets. Here traders can make a much larger return on investment if their predictions on future financial asset prices turn out to be correct. The higher returns in classical derivatives are derived from taking on leverage (more on this in a later post).

Advances in the last two decades, in Information & Communications Technology (ICT) and connectivity have sprouted new forms of technology-enabled prediction platforms. For example, crowd platform Kickstarter allows individuals to identify promising ventures and commit funds based on predicting their future success. Other crowdfunding mechanisms such as ICOs or token raises are designed to allow individuals to commit funds based on a future event they believe/expect/predict will happen.

Blockchain based financial prediction market

More recently, with the emergence of blockchain platforms and decentralized finance applications, ever more versions of prediction markets are coming to life such as Augur, Gnosis or PredictIt. In these prediction market platforms, users set up their own prediction variables on crypto assets or non-financial outcomes like politics, fund the pools and allow other participants to buy/sell outcomes between 0 and 100% (with each prediction market starting at 50% probability of occurring).

CloseCross.com will be the latest fully regulated financial prediction market platform to hit the markets, where they bridge the best of both worlds–the classical derivatives market and the prediction market platforms; wherein users will not create/buy/sell prediction markets but participate in collective smart contracts while predicting the future price of all types of financial assets including cryptocurrencies, commodities, foreign-exchange rates (forex), stocks, indexes/indices, interest rates, etc. CloseCross will also remove the need for leverage all together while still allowing participants to make amazing returns (more on unleveraged or leverage free derivatives in later posts).

Sign up for a test account with CloseCross.com to find out how easy it is to trade on CloseCrosswhen you know the process and are familiar with our platform.

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Written By
Vaibhav Kadikar
Founder, CloseCross - Decentralized derivatives driving democratic participation