Prediction Markets Emerge as New Signal for Investors

Nikolay Stoykov, Managing Partner at Alaric Securities, on Euronews Bugaria

While the financial press fixates on recession risk, stagflation, and the possibility of a second oil shock, a quieter shift is underway in how investors read the market. A new source of information is gaining ground in the West — prediction platforms. Moreover, it is increasingly outpacing traditional indicators.

In a conversation with Krasimir Cheshmedzhiev on Euronews Bulgaria, Nikolay Stoykov, Managing Partner at Alaric Securities, explained how platforms like Polymarket and Kalshi are becoming a serious signal for investors — from Federal Reserve decisions to corporate earnings and geopolitical risks. The appeal is simple: these markets aggregate the views of thousands of participants who are putting real money behind their forecasts. As a result, they create a probability estimate. Often, that estimate moves faster and more accurately than traditional analyst consensus.

But using prediction markets well requires discipline. Not every contract carries real information, and not every movement reflects genuine insight. Stoykov outlined five principles investors should keep in mind.

Not every forecast is a signal

Prediction platforms are only useful when significant sums are wagered on a given event. Thinly traded markets, or those with only a handful of participants, reflect noise rather than consensus. A well-traded contract on a Fed rate decision carries far more weight than a niche market with limited volume. Before drawing conclusions, investors should check the liquidity and depth of the market in question.

Credibility doesn’t come from insider information

The value of prediction markets isn’t that participants know something others don’t. Instead, it’s that they are forced to interpret publicly available data with unusual rigour. When people put their own capital at risk, they read central bank statements, earnings releases, and macro data more carefully than the average analyst writing a research note. Therefore, the discipline of skin in the game produces sharper reasoning. That sharpness is what ends up reflected in the price.

Watch the right markets

For investors, the signal is concentrated in a specific category of contracts: central bank decisions, quarterly corporate earnings, and major geopolitical events. Notably, these are the events where large sums flow in, participation is broad, and the outcomes directly affect asset prices. In contrast, markets on celebrity gossip or novelty events may be entertaining. However, they carry no investment weight and should not be mistaken for useful data.

A crisis is expected, but not the one most people fear

Stoykov sees a scenario closer to 2000 than to 2008 — a correction concentrated in overvalued sectors rather than a systemic banking crisis. The distinction matters. Specifically, a dot-com-style unwind reprices specific parts of the market without breaking the financial plumbing. Investors who understand the difference can position accordingly. Also, broad recession hedges designed for a 2008-type event may be mismatched to what’s actually coming.

The hidden risk is in consumption

The most underappreciated factor right now, according to Stoykov, is the consumer. The spike in fuel prices hasn’t fully shown up in the official data yet, but it’s already changing behaviour. Households are delaying large purchases — cars, property, major appliances — which could tip the scales toward recession in the coming months. This is exactly the kind of slow-building shift that traditional indicators often miss until it’s already priced in elsewhere.

The bottom line

Prediction markets are not a replacement for fundamental analysis, and they are not infallible. But they offer a real-time, money-weighted view of collective expectations that complements the slower signals coming from earnings reports, central bank communications, and economic releases. Therefore, investors who rely solely on traditional indicators — or who let headlines dictate their positioning — are operating with less information than they could. Those who learn to read prediction markets carefully, and selectively, gain an informational edge. That edge is still underexploited by the mainstream.

The takeaway is straightforward: don’t replace your existing toolkit, but don’t ignore the new one either.