How it works

Forecast Trading Example

Scenario

Jane is following Bitcoin’s onchain activity. She notices that UTXO consolidation and Ordinals minting are both ramping up—events that typically increase BTC transaction fees. She believes fees will rise over the next week.

Key assumptions

• Forecast has a live market: “Average BTC Transaction Fee This Week”
• The market currently prices the average fee at 20 sats/vByte
• Jane sees a long position at 22 sat/vByte, expecting congestion onchain to push fees higher
• She deposits a collateral worth 50 USDC into the position

Market Movement

During the week:

• Ordinals minting surges
• Mempool fills up
• BTC fees rise to an average of 25 sats/vByte

Payoff

• Forecast uses continuous payoff, so Jane’s return scales with the outcome:
• Because the final fee was 30 sats/vByte , well above her entry at 22, she earns a proportional profit
• If the final fee had stayed below 40, she’d have taken a proportional loss

Protecting users against unexpected volatile spikes

Forecast markets are designed to reflect real-world data, but can be volatile. To protect users from extreme, unpredictable spikes, each market has upper and lower bounds on payouts

How It Works

Let’s say Jane takes a long position on the BTC transaction fee market at 40 sats/vByte, meaning she earns as long as BTC transaction fees goes above 40 sats/vByte at the end of the pool. The market defines a payoff band:

• Cap: 80 sats/vByte
• Floor: 10 sats/vByte

Outcomes:

• If fees rise to 70, she earns a high proportional profit (between her entry at 40 and the cap at 80)
• If fees go to 100, her profit is capped as if the fee hit 80—protecting users from outlier events
• If fees drop to 25, she takes a proportional loss
• If fees crash to 5, her loss is capped as if the fee hit the floor at 10