During crypto bear markets, some investors consider prediction markets as alternatives to traditional crypto holdings. However, the article argues this is a poor strategy, as prediction market contracts and perpetual futures are significantly riskier than spot market investments. Contracts expire worthless if they miss strike prices by even small amounts, and leveraged perpetual futures can result in total liquidation of positions, making traditional buy-and-hold crypto investing the safer approach.
Axe note: Leverage and contract expiry make prediction markets a poor hedge during a crypto downturn.