Polymarket’s 5-minute Bitcoin up-or-down contracts have topped $4 billion in cumulative volume since launching on Feb. 12, 2026, but a recent academic paper said part of that activity was vulnerable to settlement manipulation in the final 10 seconds before expiry.
$4 billion in volume since launch
The product lets traders bet on whether Bitcoin will finish higher or lower over the next five minutes. Each round settles automatically using a Chainlink price feed, without manual adjudication, making it a standard binary-style market.
According to the source material, the product handled $200 million in volume in its first week. Combined with a similar 15-minute market, the two products averaged about $153 million in daily trading volume.
Study identified 821 accounts tied to a recurring pattern
The paper, titled Settlement Manipulation in Prediction Markets, was released on July 1 by Stanford University researchers David Dai and Ruizhe Jia and Singapore Management University researcher Shihao Yu. It examined Polymarket Bitcoin direction contracts from October 2025 to April 2026.
The mechanism described in the paper was simple. Traders with positions in a market would buy or sell spot Bitcoin on Binance shortly before settlement, pushing the Chainlink-observed price past the strike level and turning their side into the winner. The activity was concentrated in the final 10 seconds before settlement, and prices often snapped back within seconds after settlement was complete.
The researchers flagged 821 accounts that fit this pattern. The report said around 243,000 traders participated in the contract overall, which works out to roughly 1 in every 300 traders.
They estimated that these accounts made about $8.2 million in the rounds where prices were pushed, while other rounds were roughly break-even. The paper said 93% of the losses were borne by retail traders.
Outcome reversals reached 65% in close markets
The success rate was high. In markets where both sides were close to even, the rate of manipulated outcome reversals reached 65%. Even when one side had already moved to a 90% to 100% probability, 34% of markets were still flipped.
The paper also compared contracts of different durations. After the 5-minute contract launched, abnormal order-flow spikes before settlement were about 50% higher than before launch. The same signal was much weaker in the 15-minute contract.
The researchers estimated that about 6% of markets near the strike showed signs of manipulation. Among markets ranked in the top 10% of last-10-second order flow, there were about 1,600 such rounds.
Why longer-duration contracts were less exposed
According to the paper, the five-minute window was short enough that moving the spot price could still make economic sense. Extending the contract to 15 minutes would raise the cost of influencing the underlying spot market, and after subtracting any trading profit, the strategy would be much more likely to lose money.
That helps explain why the 15-minute contract showed far fewer problems.
Polymarket moved to TWAP on Aug. 7
Polymarket did not shut down the fast market. Instead, it changed the settlement design. The platform announced on July 12 that it would switch to time-weighted average price, or TWAP, with the change taking effect on Aug. 7. It also rolled out a $1 million liquidity incentive.
Under the previous system, settlement used a single price at the exact settlement second, giving manipulators a precise target. Under TWAP, settlement is based on an average over a time window rather than a single print. The 5-minute market now uses a 30-second window, while 15-minute and 4-hour markets use 60-second windows. Chainlink still handles the calculation.
That changes the economics of the trade. Instead of pushing price through one level for an instant, anyone attempting the same tactic would need to hold the distorted price across the entire window, raising the cost and making the strategy harder to profit from.
Fast markets remain a core product
The paper suggested extending contract duration as one remedy, but Polymarket chose not to change the structure of the product itself. The source said fast markets — including 5-minute, 15-minute, hourly, 4-hour, and weekly direction contracts — accounted for about 40% of crypto trading volume on the platform in September 2025 and more than 80% by March 2026.
On that basis, the 5-minute contract remains a growth driver for the platform. Polymarket kept the market live and opted to raise the cost of manipulation through settlement changes instead.
How the market works
Under the structure described in the source, each Bitcoin 5-minute market settles once every five minutes, with traders betting on whether the price finishes higher or lower over that interval. Settlement is automatic through Chainlink. The source also said the format currently supports Ether, SOL, and XRP in addition to Bitcoin.