Prediction Markets Report Record October

October Surprise

• Kalshi and Polymarket US have both already set all-time monthly trading volume records in October, with a week still left in the month.
  • Kalshi has recorded $65 billion month-to-date, already ~10% higher than September's full-month record.
  • Polymarket US recorded $10 billion, roughly 15% higher than the entirety of last month.
  • Open interest in both venues is also at record highs, with $2.05 billion and $384 million, respectively.
• With this, Kalshi now accounts for nearly 83% of total volume between itself, Polymarket US and Polymarket Global.
  • Kalshi’s October volume a year ago was $4.4 billion, almost exactly level with Polymarket's international exchange at the time.
  • Fast forward a year, and Kalshi now generates 18.7x of Polymarket Global's volume, which is a symptom of not only Kalshi’s growth, but also the decline in activity in Polymarket Global.
  • This further emphasizes the notion that the US is where the growth is, evidenced by Polymarket’s prioritization of its US arm, as Kalshi and Polymarket US, both being CFTC-regulated venues, together account for 95.6% of October's volume.
• Additionally, the volume ratio of prediction markets to spot exchanges hit a record 11.42 in October, up from 7.34 last month.
  • The ratio has risen in ten of the last twelve months, with the next test being next month’s midterm elections, which will show whether election markets can add a second growth lever on top of sports for these prediction markets.

Paperweight

• Since launching on October 10, 2026, Papertrade has generated an astounding $1.46 trillion of notional volume.
  • While the headline figure is impressive, it is a product of the protocol’s design, rather than a sign of organic demand.
  • Papertrade is a perps protocol that offers up to 1,000x leverage on BTC and ETH, priced off the midpoint of Hyperliquid's best bid and offer.
  • Every trade settles against a single protocol-owned USDC pool that started at zero and is funded only by realized trader losses.
  • Losing traders, including liquidated ones, are minted the protocol’s PAPER tokens at a rate of 100 tokens per $1 lost.
• Roughly a week after going live, Papertrade faced scrutiny over decisions on the transferability of its native PAPER tokens.
  • Their initial launch plan, posted on October 1st, stated PAPER would become transferable "after a sufficient period of time has passed."
  • On October 19th, they backtracked on this statement, stating that they “do not have plans to allow off-contract token transferability,” which was met with disdain from the community.
  • The team’s rationale is that a liquid PAPER market would make its pool an attack target, describing PAPER perps as a “leveraged bet on bankroll solvency.”
  • In simpler terms, the worry is that a potential manipulator could short PAPER on another venue, then push Hyperliquid's reference price to drain the pool. The drain loses money by itself, but it becomes profitable once the short pays out.
  • Since Papertrade has no control over venues that list PAPER, the best decision, per the team’s statements, was to stop PAPER from leaving the contract altogether.
  • On the other hand, users who lost money on purpose to farm PAPER now hold a staking position they cannot sell.
• We’ll now have to watch the impact this decision will have on the protocol going forward, and whether loss-funded tokens can work in this category at all.

Eek ETH ETF

• Ethereum Spot ETFs have put in a third consecutive week of outflows, combining for nearly $1 billion in outflows. This follows a strong September for the suite of ETFs, which pulled in north of $830 million.
  • The pace of outflows has slowed week over week, which is a good sign that sellers have slowed and momentum is cooling.
• Ethereum has traditionally served as a leading indicator for altcoin performance. The second-largest cryptocurrency by market capitalization is also home to most DeFi, RWA, and stablecoin activity, making it a go-to for riskier allocations.
  • Other tokens are positioning to challenge Ethereum’s status as the de facto altcoin exposure, with specific tokens and projects performing well in niche areas.
• Ethereum ETFs have also been gaining traction over spot. The ETF-to-spot ratio has climbed tremendously since the ETFs were launched, with ETFs now responsible for roughly 20% of spot volume.
  • Traders are benefiting from the familiar form that ETH ETFs take on, allowing for traditional margining, trading, and custody in traditional finance.
  • This trend likely continues as DeFi and the internet as a whole face heightened pressure from exploits accelerated by AI.

BTC Dom Calm

• Bitcoin has consolidated in the $80k price range this week, with open interest reflecting much of the same.
  • Bitcoin dominance has risen to above 55%, up from its August lows of 53%. A sharper drawdown in altcoin prices has also accelerated the rise in Bitcoin dominance, with many dropping 30%+.
• These periods are often associated with defensive positioning as traders move back to Bitcoin as a relatively safer position.
  • Despite some strong performance from altcoins, Bitcoin is still red on the year, about -8% YTD. This is also mirrored in stocks, where the AI complex has had a challenging week fighting momentum that has turned against it.
  • For altcoins, this means thinner liquidity and weaker price support. Many markets rely on there being enough liquidity to support price discovery and, as such, are now dealing with more volatility.
  • Traditionally, a strong altcoin move has been catalyzed by a strong move in Bitcoin. With BTC price range-bound, a sustained altcoin rally would need its own catalyst rather than Bitcoin strength trickling down.

RWA Stock Race

• New chart alert! We’re now tracking the breakdown of tokenized stock issuers. As more issuers are racing to be the largest, the field has become crowded with different variations of tokenized stocks.
  • The podium is fairly tight, with Binance’s bstock, Ondo stocks, and Payward’s xStocks accounting for $2.8 billion of the $3.5 billion in tokenized stocks.
  • Tokenized stocks are making up the largest RWA category by volume despite their lower market capitalization relative to asset classes like treasuries and commodities.
• The current landscape has multiple variations of the same equity tokenized; functionally, this means there are xTSLA, TSLAon, and bTSLA, which confuses users and fragments liquidity. Ultimately, as more users become familiar with tokenized stocks, the ones with the deepest liquidity and best holder rights will reign supreme.
  • The top iterations of tokenized equities currently function as essentially wrappers around stock held in a holding company. This structure often retains voting rights, dividends, and bankruptcy claims you would otherwise get by holding the asset in your brokerage.
  • There are companies working towards native tokenization, where the asset you hold onchain is the equity itself rather than a wrapped version. However, this process is proving far more cumbersome under regulation.