In crypto, liquidity is everything. Without it, even the smartest mechanism design or slickest interface is dead on arrival. And no sector has struggled more with liquidity than prediction markets.
Polymarket changed that. Over the past two years, it quietly ran one of the most aggressive liquidity bootstrapping campaigns in crypto history, spending roughly $10 million to get its markets moving. The goal wasn’t to fake volume or inflate stats. It was to build a real, sustainable flow of trades that could survive long after incentives ended. It worked.
The Liquidity Paradox
Prediction markets have always faced a chicken-and-egg problem. Traders won’t participate if order books are empty, and liquidity providers won’t show up without traders. Most projects die in this stalemate.
Polymarket decided to brute-force the loop. At its peak, it paid more than $50,000 per day to professional market makers who could keep spreads tight and depth consistent across hundreds of markets. It wasn’t paying for noise or wash trading. It was paying for quality.
Paying for Quality Liquidity
Instead of rewarding pure trading volume, Polymarket introduced quality-weighted incentives. Market makers were rewarded for three specific behaviors:
Tight spreads: keeping prices close to the real probability line
Depth: showing meaningful size on both sides of the book
Consistency: maintaining quotes at the best price for long stretches of time
These metrics created a feedback loop that improved real liquidity, not artificial churn. Order books looked healthy because they were.
The model also forced participation across the long tail. If you wanted rebates on headline markets like presidential elections or CPI prints, you also had to quote in smaller or less popular markets. Insiders called it the “cable package” model. Liquidity was bundled.
“Liquidity isn’t luck. It’s design. The right incentives make the market work before the market even exists.”
Timing the Attention
Polymarket recognized that attention, not just incentives, drives volume. During major news events and macro releases, user traffic spiked and spreads widened. To keep markets functional during those volatile hours, the platform introduced surge multipliers that increased rebates three to five times during big events like debates or CPI announcements.
That simple change meant liquidity actually grew during volatility instead of disappearing when users needed it most.
The Result
After more than a year of structured incentives, the program had cost around $10 million. But the market it created was finally self-sustaining.
By late 2025, Polymarket’s weekly volume was topping $300 million, and rebates had fallen to a sustainable $0.025 per $100 traded. The platform had escaped the subsidy trap that killed earlier prediction markets like Augur and Omen. It wasn’t the money alone that worked. It was how that money was structured.
The Hidden Ingredient
Behind the scenes, Polymarket relied on Frequent Batch Auctions (FBAs), a mechanism that groups trades into discrete clearing intervals instead of a constant order stream. This eliminates high-frequency latency battles and allows slower participants to compete fairly.
For prediction markets that settle on event outcomes rather than tick-by-tick prices, batching every few seconds is enough to feel instantaneous while keeping the system efficient. The result is deeper liquidity with fewer distortions.
This same approach is now being explored by Hyperliquid through its HIP-3 and HIP-4 proposals for perpetual prediction markets, and even by Coinbase, which has hinted at adding event-based trading in its “Everything Exchange” roadmap.
What It Means for Builders
Polymarket’s campaign offers a clear lesson: liquidity isn’t an accident. It’s something you engineer. You can’t rely on community hype or organic momentum to fill order books. You have to design the right incentives and infrastructure from the start.
Most projects won’t have millions to burn, but they can replicate the structure. Prioritize quality over quantity. Reward consistency. Time incentives to match attention. And build systems that make liquidity scalable, not subsidized.
The best liquidity is invisible. It just works. Polymarket proved that with the right mechanics, even one of crypto’s toughest categories can come alive.
Sources:
Messari, “Time Will Tell: What’s Next for Prediction Markets” (Sept 2025)
Neel Daftary, “5 Problems Holding Back Prediction Markets” (X thread, Oct 2025)
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