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How TWAP Feeds Can Power Smarter Market Making on Polymarket

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A technical framework proposed by algorithmic trader Nagi explores how time-weighted average price (TWAP) feeds can improve passive market making on Polymarket, the prediction market platform. Unlike conventional market makers that quote relative to the current order book, a TWAP-aware system compares live prices against a time-weighted reference to assess whether providing liquidity is justified. Polymarket documents Chainlink-computed 30-second and 60-second TWAP feeds through its real-time data infrastructure, which can serve as an additional input to a quote engine. The proposed model blends the order-book midpoint with a TWAP reference using a tunable influence parameter that adjusts based on data freshness, market volatility, and spread. The author frames the approach as a research hypothesis, cautioning that TWAP should inform quoting decisions rather than mechanically dictate them.

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How TWAP Feeds Can Power Smarter Market Making on Polymarket · ShortSingh