- Fed rate decisions are popular bets on Polymarket.
- Odds of the Fed's next move tend to "crystallize" 26 days before meetings, Polymarket said.
- Trump's potential Fed chair change may impact Polymarket trading strategies.
Bettors on prediction markets love wagering on Fed decisions.
In a post on its blog, Polymarket said that Fed moves are a favorite bet for a certain kind of trader, and they've identified a framework for how they're navigating the market.
Polymarket's internal data shows that the moment when the odds around a Fed decision "crystallize"—defined as the leading odds becoming dominant and ceasing to flip—actually sets in weeks before the meeting. This probably is not surprising, as futures markets tend to broadcast the Fed rate-cut odds for weeks or even months before the next meeting.
Still, Polymarket's blog shows how certain kinds of bets known as "bonds," which are high-probability bets that rarely flip, are approached by bettors.
"Across 22 Fed decisions from March 2023 to December 2025, I find that Polymarket odds crystallize with a median of ~26 days before the Fed meeting, which is early enough to create tradable entry points," the author of the post writes.
"Crystallization" is defined by one outcome pulling ahead with at least 80% odds and remaining stable for several days in a row without any major swings.
Polymarket.
The post also notes that, in most cases, odds of a rate decision settle early, as the central bank typically chooses between keeping rates unchanged or adjusting them by 25bp. However, recently, the US economy has faced a lot more uncertainty around the economy and the path of interest rates.
"Each new data release can completely reverse market expectations, preventing odds from stabilizing," the post said. "Prospectively, traders can identify regime shifts by reading more on Fed communications signaling framework uncertainty or monitoring elevated VIX for a continuous period."
The analysis also highlights the key lead-lag relationship between institutional markets, which adjust to monetary speculation almost immediately, and prediction markets, which typically react roughly a day and a half later.
Platforms like Polymarket aren't uncovering new information. Rather they are mirroring moves already priced in by other markets, creating small windows where Polymarket odds have not caught up to the broader market.
"It is worth noting that traders should view this on a relative-value basis rather than solely believing one is correct while the other is wrong as odds could flip quickly with new emerging data."
The author noted, though, that there is a potential wildcard for traders to consider going forward. Trump is set to replace Powell as Fed chair this year, and when he does, the central bank's new leader could abandon the forward-guidance policy, a key component of Polymarket's trading strategy.
Lee acknowledged that such a scenario would mark the type of regime shift that would be a test of the framework he outlined for navigating Fed policy moves.
The post Polymarket shares how bettors are navigating Fed rate decisions on the prediction platform appeared first on Business Insider
