<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJoKzo0fQz7AFQziIETiDnzxAjleiDB0GMQx8xL6jFzI0AA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJoKzo0fQz7AFQziIETiDnzxAjleiDB0GMQx8xL6jFzI0AA/641"/>This is the original article of the 2213th issue of Baihua Blockchain Author | Clow
Produced by | Baihua Blockchain (ID: hellobtc)
Last month, a friend who trades perpetual contracts told me he was done with contracts.
Not because he was scared of losing—although he did lose quite a bit—but because he discovered a &#34;cleaner&#34; way to gamble. Polymarket launched a 5-minute Bitcoin price prediction, where he could spend $10 to buy a bunch of &#34;up&#34; shares, and if Bitcoin rose by even 1 cent after 5 minutes, he would get back $100. If it fell? He loses that $10, gone, clean and simple.
No liquidation, no funding rates, no suffocating feeling of being liquidated at 3 AM only for the price to bounce back.
He said, &#34;This thing is just a crypto version of scratch cards, but the odds are right there in front of you.&#34;
Data shows he is not alone. On March 11, Polymarket disclosed that the daily trading volume of the 5-minute price prediction market had exceeded $60 million within less than a month of its launch, accounting for 67% of all directional prediction trading volume on the platform. There are 288 settlement windows every day, running from morning to night, with a new round every 5 minutes, non-stop.
Prediction markets were once used to bet on the U.S. elections and the Super Bowl. Now, it has turned into a 24-hour operating slot machine.
01
The Three Mountains of Perpetual Contracts
Why are retail investors fleeing perpetual contracts?
The answer is simple: perpetual contracts are too unfriendly to retail investors. First, liquidation. If you open a long position with 10x leverage, a 10% price drop will wipe you out, and even if the price rebounds an hour later, it doesn't matter to you; your position has already been eaten by the exchange. Second, funding rates. When longs are crowded, you have to pay a &#34;rent&#34; to the shorts every 8 hours, and the longer you hold, the more expensive it gets. Third, price spikes. During the thin liquidity hours of the night, a price spike of a few hundred dollars can wipe out a whole bunch of stop losses.
The 5-minute prediction market eliminates all three of these problems.
If you buy a $0.1 &#34;up&#34; share, the worst outcome is losing that $0.1. But if you win, you get back $1—a 10x return. It doesn't matter how Bitcoin fluctuates in between; you only care about the price at the end of those 5 minutes. There is no liquidation, no funding rates, and no &#34;targeted explosions&#34; by market makers.
In simple terms, this is a form of speculation with completely transparent risks. You know beforehand how much you can lose at most, which is impossible in perpetual contracts—unless you don't use leverage, but who plays perpetual contracts without leverage?
For those who were once keen on meme coins and hundred-fold contracts, the 5-minute prediction market is tailor-made: high frequency, exciting, low threshold, and instant results. This doesn't replace perpetual contracts; it steals users away from perpetual contracts
02
How does Polymarket do it?
Technically, Polymarket uses a &#34;Conditional Token Framework&#34; (CTF), where each 5-minute window represents an independent binary event: Did Bitcoin rise or not? Settlement runs on the Polygon chain, which is low-cost and fast; the price feed uses Chainlink Data Streams to ensure that the settlement price is not determined solely by the platform.
But the truly clever design lies in the transaction fees.
In such a short 5-minute cycle, what is the biggest fear? Delayed arbitrage. Someone could place bets with a faster data source just a few seconds before the Chainlink price feed updates, almost guaranteeing a profit. Polymarket's response is quite ingenious: dynamic fee rates. When the market probability approaches 50% (the point of maximum uncertainty), the transaction fee for taking orders is higher, reaching up to 1.56%. Conversely, when the outcome becomes more certain (probability close to 0 or 100%), the fees drop to nearly zero.
This means that if you want to arbitrage in the most &#34;profitable&#34; gray area, you must first pay a not-so-cheap toll. The space for making money through internet speed is significantly compressed, forcing you to rely on genuine judgment to place bets.
The collected transaction fees are not wasted—20% is directly returned to market makers, incentivizing them to provide deeper liquidity on the order book. Within a month of launching, the depth of the 5-minute market can already accommodate large transactions.
03
AI robots have arrived
With a daily trading volume of $60 million, how much do retail investors contribute? Probably not as much as one might think.
Developers on Reddit are already sharing trading bots targeting the 5-minute market, claiming a win rate of over 80%. These bots use &#34;mechanism tagging&#34; technology to automatically determine whether the current market is bullish, bearish, or sideways, and then switch between different prediction strategies. With 288 settlement windows each day, the backtesting data is extremely rich, allowing AI to accumulate sample sizes in days that would take traditional markets years to gather.
More notably, Polymarket has just announced a collaboration: On March 10, the platform partnered with Palantir and TWG AI to use the Vergence AI engine developed by the latter two to monitor trading activities, screen for fraudulent accounts, and detect insider trading.
There is a subtle contradiction here. On one hand, the platform welcomes AI traders—they bring liquidity and make the market more efficient; on the other hand, it must guard against AI cheating—using faster data sources to front-run, cross-platform arbitrage, or even manipulating prices. Polymarket's solution is: use AI to monitor AI.
As for who will win this &#34;AI versus AI&#34; arms race, no one knows yet. But one thing is certain: the proportion of human participation in the trading volume of the 5-minute market will only decrease.
04
Exchanges can’t sit still
In the face of encroachment from prediction markets, traditional exchanges have responded remarkably uniformly: if you can't beat them, recruit them
Binance launched Opinion (OPN), a prediction market infrastructure protocol, through Launchpool in early March, attempting to capture the new territory of prediction markets at the protocol level. Coinbase directly integrated Kalshi's contracts at the end of January, allowing U.S. users to trade prediction markets within the Coinbase app. Gemini took a more aggressive approach, spending five years obtaining a DCM license from the CFTC and building Gemini Predictions, covering all 50 states in the U.S.
Three routes, three strategies, but the goal is the same: to retain users who are flowing into prediction markets.
The story of Kalshi best illustrates the trend. In 2024, Kalshi's annual trading volume was about $300 million, an unremarkable figure. Then it embedded NFL event contracts into Robinhood, allowing tens of millions of retail users to buy prediction contracts just like stocks. By 2025, Kalshi's annual trading volume soared to $23.8 billion, with annualized figures touching $50 billion at one point.
The jump from $300 million to $23.8 billion was not because Kalshi became stronger, but because it found distribution channels. Prediction markets are no longer a niche tool that users need to actively seek out—they have been integrated into brokerage apps, payment software, and even media platforms, becoming a fundamental financial function.
This capability for distribution is what exchanges truly fear.
05
The regulatory sword hangs overhead
The faster prediction markets grow, the more apparent the contradictions in regulation become.
In the U.S., the CFTC has determined that prediction contracts are &#34;swaps,&#34; classified as federally regulated financial derivatives, and submitted a court opinion in February 2026 to assert exclusive jurisdiction. However, state gaming commissions are not buying it—the chair of the Nevada Gaming Control Board stated, &#34;In our view, this is sports betting, plain and simple.&#34; Nearly 20 states have initiated lawsuits or cease-and-desist orders against Kalshi, and 37 states have formed an alliance opposing federal &#34;land grabs.&#34;
The result is an absurd situation: legal at the federal level, illegal at the state level. Polymarket has already acquired a CFTC-licensed entity by the end of 2025 to relaunch a U.S. version in a waiting list manner, but as of today, its expansion speed is still constrained by this tug-of-war between federal and state authorities.
In Asia, the situation is more direct. The Singapore Gambling Regulatory Authority directly banned Polymarket in January 2025, considering all bets, whether on Bitcoin or the Super Bowl, as illegal gambling. The Hong Kong Securities and Futures Commission is slightly more courteous, allowing professional investors to trade virtual asset derivatives, but firmly closing the door on retail investors.
The European Union is mired in a classification quagmire: if prediction contracts are anchored to financial indices, they are financial instruments under MiFID II; if anchored to non-financial events, several member states treat them directly under gambling prohibitions. France, Belgium, and Romania have already taken the lead in blocking them
The global regulatory attitude towards prediction markets can be summarized in one sentence: everyone wants to regulate, but no one knows how to do it.
06
Summary
Polymarket's 5-minute market has proven one thing: retail investors have never wanted to &#34;hold assets,&#34; but rather to &#34;bet on outcomes.&#34;
When a platform can take speculation to the extreme with simpler rules, lower thresholds, and faster feedback cycles, traditional exchanges' high-leverage products are no longer the only choice. Exchanges are already scrambling to incorporate prediction markets, while regulators are still debating whether it is gambling or finance—but users do not care about these definitions.
Every 5 minutes, 288 times, day after day.
The votes cast by retail investors with their feet are more honest than any regulatory definition

GBTC

COIN

Polymarket has launched a 5-minute Bitcoin price prediction, attracting a large number of retail traders. The platform's daily trading volume has exceeded $60 million, accounting for 67% of all directional prediction trading volume in the cryptocurrency space. Compared to traditional perpetual contracts, the 5-minute prediction market eliminates issues such as liquidation, funding rates, and price spikes, providing a simpler trading method and becoming a 24/7 operating prediction market

- A shift in trading preferences is evident as users gravitate away from perpetual contracts to Polymarket's 5-minute Bitcoin prediction market, which offers clarity and reduced risks.  
- With a trading volume exceeding $60 million daily, Polymarket eliminates issues like liquidation and funding fees, appealing to those seeking high-frequency, instant results.  
- Traditional exchanges are reacting by integrating prediction markets into their platforms, yet regulatory challenges loom, highlighting the ongoing debate over the classification of such markets as gambling or financial instruments.

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