Polymarket targets P2P arbitrage: How the new fee structure changes the game

Recently, news of traders earning $515,000 per month through ultra-short-term arbitrage strategies on Polymarket has attracted market attention. The trader, codenamed 0x8dxd, completed over 7,300 trades in just one month with a success rate of 99%, making them a true arbitrage machine.

How Arbitrageurs Profit from P2P Trading

The core of this strategy is simple: exploiting the time difference between Polymarket’s quotes and mainstream exchange prices updates. When Bitcoin or Ethereum prices fluctuate on off-chain exchanges, the quotes on Polymarket may lag by hundreds of milliseconds or even seconds. Smart trader 0x8dxd seizes this window, placing orders immediately after price confirmation to lock in the spread with almost zero risk.

This is not traditional hedging arbitrage but a typical P2P arbitrage model—profiting from information asymmetry and execution speed rather than market predictions. Each trade is conducted on a deterministic basis, which explains why a 99% success rate is not luck but a systemic advantage.

Polymarket’s Counterattack: Making Arbitrageurs Pay Out of Pocket

Polymarket is evidently dissatisfied with this behavior that eats into trading fees. The platform quickly introduced new rules to curb such activities. The most critical change is the introduction of a dynamic fee mechanism: for unilateral trades (takers) executed within a 15-minute window, fees can be as high as 3.15%.

This rate may seem high, but it is cleverly designed—this portion of the fee directly flows to liquidity providers, effectively transferring the value extracted by arbitrageurs from the market to market makers. In other words, if you want to make quick profits through P2P arbitrage on Polymarket, the costs will significantly increase, and profit margins will be severely compressed.

Market Depth vs. Short-term Arbitrage

This move reflects a fundamental contradiction: prediction markets need liquidity to attract participants, but excessive short-term arbitrage activity is essentially “vampiric.” The success of 0x8dxd exemplifies this problem—high-frequency P2P arbitrage does not provide genuine market depth; it merely harvests spreads without taking on risk.

Polymarket’s new rules essentially say: participation is allowed, but free riding is not. If you want to profit from time arbitrage, you must pay the corresponding costs to those providing liquidity. This protects genuine risk-takers and maintains the platform’s market health.

For other prediction market platforms, this is a valuable case study. How to balance encouraging trading participation and preventing improper arbitrage is becoming a challenge many platforms need to address.