ADDENDUM: Actionable Edge Mapping + Prediction Market Ladder

Crypto Desk — MERGED FINAL

Base: Claude Opus 4.6 (complete, unmodified) + Panel Additions from Gemini Pro, GPT-4.1, Grok-4-Fast, DeepSeek V3

Panel additions are tagged [PANEL: Model Name] throughout.

This addendum supplements the original Crypto Desk spec. It does NOT replace the existing spec — it adds two critical layers: (1) mapping every edge to a specific trade on a specific platform, and (2) a systematic methodology for scanning prediction market ladders for crypto-related contracts.

TOPIC 1: ACTIONABLE EDGE OUTPUT

1. Edge-to-Trade Mapping Table

2. Actionable Output Format

JSON output sent via Telegram and to other desks:

{
  "edge_id": "CRYPTO-20260315-BTC-OPTIONS-001",
  "desk": "crypto",
  "timestamp": "2026-03-15T14:22:00Z",
  "edge_description": "Deribit options chain implies 31% probability BTC above $105K by Mar 21. Kalshi contract for same threshold is at 20 cents. 11-cent edge.",
  "signal_type": "options_implied_mispricing",
  "asset": "BTC",
  "confidence_level": 78,
  "composite_signals": {
    "master_sentiment": 62,
    "smart_money_index": 71,
    "funding_weighted_sentiment": "neutral_bullish",
    "risk_regime": "risk_on"
  },
  "platforms": {
    "Kalshi": {
      "action": "Buy YES on 'BTC above $105K' (Mar 21 expiry)",
      "contract_ticker": "KXBTC-20260321-T105000",
      "current_price": 20,
      "fair_value": 31,
      "edge_cents": 11,
      "edge_after_fees": 9,
      "liquidity_available_usd": 800,
      "max_suggested_size_usd": 400
    },
    "Polymarket": {
      "action": "Buy YES on equivalent BTC price contract",
      "current_price": 22,
      "fair_value": 31,
      "edge_cents": 9,
      "edge_after_fees": 7,
      "liquidity_available_usd": 1200,
      "max_suggested_size_usd": 600
    },
    "Binance": {
      "action": "Long BTC-USDT perp with 2x leverage (if directionally aligned)",
      "current_price_btc": 98500,
      "target": 105000,
      "stop": 95000,
      "risk_reward": "1.86:1",
      "edge_pct": 1.8
    }
  },
  "time_sensitivity": "MEDIUM — option expiry in 6 days, edge should persist 24-48h as prediction market adjusts slowly.",
  "sharp_reference": "Deribit BTC options chain, Mar 21 expiry. Call spread $104K/$106K replication gives 31% implied probability.",
  "risk_factors": ["Deribit skew may overstate tail probability", "Kalshi liquidity could dry up", "Macro event (CPI, FOMC) could override crypto-specific signals"]
}

Telegram summary format:

CRYPTO EDGE: BTC Options-Implied Mispricing

Deribit implies 31% chance BTC > $105K by Mar 21
Kalshi: 20c | Polymarket: 22c

Actions:
  Kalshi: Buy YES @ 20c | Edge 11c (9c net) | $800 liq
  Polymarket: Buy YES @ 22c | Edge 9c (7c net) | $1200 liq
  Binance: Long perp 2x | Entry $98.5K | Stop $95K | Target $105K

Confidence: 78% | Regime: Risk-On
Composites: Sentiment 62 | Smart Money 71 | Funding Neutral
Window: 24-48h

3. Platform Priority Ranking

TOPIC 2: PREDICTION MARKET LADDER STRUCTURE

1. Desk Data Mapping to Prediction Market Contracts

Both Kalshi and Polymarket operate ladder structures with multiple contracts at different price thresholds. Neither platform is secondary — Kalshi and Polymarket must both be scanned for every applicable contract type. Ladder structures, edge sizes, and liquidity differ between platforms and must be evaluated independently.

2. Sharp Reference Identification

3. Probability Curve Construction Method

Distribution type: Log-normal (baseline) + fat-tail adjustment

Crypto returns are famously fat-tailed — BTC has experienced 20%+ moves in a single day multiple times. A pure log-normal model systematically underestimates tail probabilities. The correction:

1. Baseline: Log-normal distribution using the current spot price as the geometric mean and Deribit ATM implied volatility (annualized, converted to the contract timeframe) as the volatility parameter.

2. Skew adjustment: Deribit's IV smile is not flat. OTM puts trade at higher IV than OTM calls (negative skew during fear, positive skew during euphoria). Use the IV at EACH specific strike from the chain, not a single ATM vol.

3. Fat-tail adjustment: Compare the options-implied probability at 2+ sigma thresholds to the historical frequency of such moves. If the historical frequency of BTC moving >15% in 7 days is 8% but the options-implied probability is only 5%, adjust upward. Use the maximum of (options-implied, historical empirical) for tail thresholds.

Distribution type by contract category:

• BTC/ETH price ladders: Log-normal (standard), fat-tail adjusted as above.
• Volatility/Move ladders (e.g., "BTC daily move >$X"): Normal distribution for percentage moves; optionally t-distribution for fat tails.
• Count-based events (block milestones, halving): Poisson distribution or empirical. Use blockchain explorers for block time distributions. [PANEL: GPT-4.1]
• Binary events (ETF approval, regulatory action): No continuous distribution — use event study datasets from comparable prior events (past approvals, SEC timelines) blended with analyst consensus. [PANEL: GPT-4.1]

Historical data feeding the model:

• BTC/ETH hourly OHLCV data from CoinGecko (last 3 years). Calculate realized vol and return distributions.
• Deribit historical DVOL index (tracks ATM implied vol over time). Establishes "normal" vol regime for regime classification.
• Historical max drawdown and max rally statistics over 1/7/14/30-day windows. Feeds the fat-tail adjustment.
• Etherscan/Beaconcha.in historical gas fee time-series for gas contracts. [PANEL: Gemini Pro]
• Chainalysis on-chain stablecoin flow history for supply contracts. [PANEL: Grok-4-Fast]

How the sharp reference anchors the curve:

1. Pull the full Deribit options chain for the expiry closest to the Kalshi or Polymarket contract expiry.
2. For each threshold (e.g., "$105K"), find the Deribit calls/puts bracketing that strike.
3. Use the call spread approximation: P(BTC > $105K) ≈ [C($104K) - C($106K)] / ($106K - $104K) × $1K (adjusted for contract multiplier). This gives the risk-neutral probability directly from market prices — no model needed.
4. If no Deribit options exist at the exact threshold, interpolate IV from the smile and use Black-Scholes N(d2) with the interpolated IV.
5. Apply the fat-tail adjustment for thresholds >2 sigma from spot.

Recalculation frequency:

• Every 15 minutes during US market hours (9:30 AM - 4 PM ET) when Kalshi is most active.
• Every 1 hour during off-hours (crypto is 24/7 but prediction market activity drops overnight).
• Immediately upon any of: BTC moves >2% in 1 hour, Deribit DVOL changes >5% in 1 hour, major funding rate flip, large ETF flow announcement.
• Immediately upon a new large Deribit options block trade (signals institutional positioning shift). [PANEL: Grok-4-Fast]
• Daily reset at 00:00 UTC regardless of price action. [PANEL: Grok-4-Fast]

4. Ladder Scanning Methodology

Step-by-step process:

1. Pull all crypto contracts from Kalshi and Polymarket: Call both APIs to get every BTC, ETH, SOL, and other crypto price threshold contract. Group by asset, sort by threshold. Kalshi and Polymarket ladders are scanned independently — both platforms are first-tier and neither is secondary. Evaluate each platform's contracts on their own liquidity and pricing.

2. Pull current Deribit options chain: For BTC and ETH, get the full chain for the expiry closest to each contract's expiry date. This gives you the options-implied probability curve.

3. For each contract threshold on both Kalshi and Polymarket:

   • If a Deribit option exists within $1K of the threshold (for BTC): use the call spread replication directly. This is the most accurate method.
   • If no matching Deribit option: interpolate from the IV smile and use N(d2) with skew-adjusted IV.
   • For SOL/altcoins: use the realized-vol-based model (less accurate, flag as lower confidence).
   • For volatility contracts (Kalshi CRYPTVOL): use DVOL and historical realized vol. [PANEL: Gemini Pro]
   • For gas fee contracts (Kalshi GAS-24H): use Etherscan historical time-series model. [PANEL: Gemini Pro]

4. Calculate raw edge: raw_edge = fair_probability - kalshi_price (for buying YES) or reverse for NO. Same calculation applied independently to Polymarket contracts.

5. Calculate net edge after fees:

   • Kalshi fee: Price * (1 - Price) * 0.07 (highest at 50 cents, approximately 1.75c at 50c, lower at tails). [PANEL: Gemini Pro]
   • Polymarket fee: ~0.5c (gas + CLOB fee on Polygon).
   • net_edge = raw_edge - platform_fee

6. Apply composite signal filter: Overlay the desk's composite signals:

   • If Smart Money Index >70 AND edge is bullish → boost confidence.
   • If Funding Rate extreme (>0.05%) AND edge is bullish → reduce confidence (market may be overheated).
   • If Fear & Greed <20 AND edge is bullish → boost confidence (contrarian).
   • If USDC depeg risk detected → reduce all Polymarket edge sizes by the depeg percentage (Polymarket is USDC-settled).

7. Filter:

   • Minimum 3-cent net edge (both platforms).
   • Minimum $100 liquidity for Kalshi; minimum $200 liquidity for Polymarket (Polymarket has different order book depth dynamics). [PANEL: Grok-4-Fast]
   • Minimum confidence 60%.
   • Exclude contracts expiring in <2 hours (crypto is volatile — too risky on very short contracts).

8. Rank: Sort by net_edge * confidence * sqrt(liquidity) — balances edge size, conviction, and executability.

9. Flag tail opportunities: Any threshold >2 sigma from current spot is a tail opportunity. These typically have the largest edges because prediction market participants anchor to recent price action. Flag contracts with >7c edge as "TAIL OPPORTUNITY" for both Kalshi and Polymarket. [PANEL: Grok-4-Fast]

10. Track edge persistence: Log timestamp of discovery. Monitor every 15 minutes post-detection. Flag if edge shrinks below 2c. Edges typically shrink 20-50% as contract approaches resolution or as fills occur. [PANEL: Grok-4-Fast]

5. Edge Examples with Real Numbers

Example 1: BTC Options-Implied Tail Mispricing

• Date: March 15, 2026
• BTC spot: $97,500
• Deribit Mar 21 expiry ATM IV: 55% (annualized)
• 7-day vol (σ): 55% * sqrt(7/365) = 7.6%
• 1-sigma range: $97,500 ± $7,410 = $90,090 to $104,910
• Kalshi rung: "BTC above $110K" (Mar 21 expiry) priced at 8 cents (implied 8%)
• Deribit-derived fair probability: Using the $110K call spread replication from Deribit chain: P(BTC > $110K) = 4.2%. Using the IV at the $110K strike (62% — higher than ATM due to positive skew during bullish sentiment), N(d2) gives 5.1%. Historical frequency of BTC >12.8% move in 7 days: 6.5%. Fat-tail adjusted estimate: 6.0% (average of methods, weighted toward options-implied).
• Raw edge: 8% - 6% = 2 cents — marginal, barely tradeable.
• But check the NO side: Buy NO at 92c. Fair NO value = 94c. Edge = 2c. Not interesting.
• Move to a better rung: "BTC above $105K" at 15c. Fair value from Deribit: 20.5%. Raw edge = 5.5c. Net edge = 4.0c. This is tradeable. Buy YES at 15c on Kalshi. Also check Polymarket "BTC above $105K" ladder rung — if priced at 17c (fair 20.5%), that's 3.5c raw, ~3c net. Still passes filter.

Example 2: Funding Rate Extreme + Kalshi/Polymarket Contrarian

• Date: March 15, 2026
• BTC spot: $103,200
• Binance 8h funding rate: +0.09% (annualized ~33%)
• Bybit: +0.08%, OKX: +0.11%
• Signal: All three exchanges have funding >0.05% — extreme long leverage. Historical: 65% of the time, BTC drops 3-7% within 48h when funding is this elevated.
• Kalshi rung: "BTC above $100K" (2-day expiry) priced at 72 cents (implied 72%)
• Polymarket rung: "BTC above $100K" (2-day equivalent) priced at 70 cents (implied 70%)
• Fair probability given funding extreme: If 65% chance of 3-7% drop from $103.2K, expected move = ~$4K down to $99.2K. P(BTC stays above $100K) ≈ 45-50%.
• Kalshi raw edge: 72% - 48% = 24 cents. Net edge after fees: ~22.5 cents. Buy NO.
• Polymarket raw edge: 70% - 48% = 22 cents. Net edge after Polymarket fees: ~21.5 cents. Buy NO.
• Trade: Buy NO on both Kalshi and Polymarket. Simultaneously: short BTC perp on OKX (collect 0.11% funding per 8h = 0.33% over 24h).
• Risk: Funding can stay extreme longer than expected. This is a contrarian trade — requires conviction.

Example 3: ETH ETF Flow Signal + Kalshi/Polymarket Ladder

• Date: March 15, 2026
• ETH spot: $3,850
• Signal: ETH spot ETFs see $300M inflow today (3rd consecutive day of $200M+ inflows). Total 3-day inflow: $750M.
• Historical pattern: When ETH ETF 3-day inflows exceed $500M, ETH rallies 5-8% in the following 5 days (73% of the time).
• Expected ETH price in 5 days: $3,850 * 1.065 = ~$4,100
• Distribution: Log-normal with current mean $3,850, adjusted upward for ETF flow signal. SD from 14-day realized vol = 4.8% for 5-day horizon.
• Kalshi rung: "ETH above $4,000" (5-day expiry) at 28 cents (implied 28%)
• Polymarket rung: "ETH above $4,000" (5-day equivalent) at 30 cents (implied 30%)
• Fair probability: Given the ETF flow signal adjusts the mean to ~$4,050, P(ETH > $4K) with SD $185 = P(Z > (4000-4050)/185) = P(Z > -0.27) = 60.6%.
• Kalshi raw edge: 60.6% - 28% = 32.6 cents. Net edge = 31.1 cents. Buy YES.
• Polymarket raw edge: 60.6% - 30% = 30.6 cents. Net edge = ~30.1 cents. Buy YES.
• Caveat: ETF flow-to-price lag is an emerging pattern (ETH ETFs are new). Lower confidence than BTC options-implied edges. Size accordingly.

Example 4: ETH Gas Fee — Time-of-Day Model

• Market: Kalshi GAS-24H contract for "Will the 24hr avg ETH gas price be >30 Gwei?" for a Wednesday.
• Sharp Reference: Internal time-series model using historical Etherscan data. Wednesdays see significantly lower gas usage due to reduced network activity. Forecast: 22 Gwei average. P(avg >30 Gwei) = 25%. Fair value = 0.25.
• Kalshi Price: "Yes" at 40 cents.
• Edge: "No" fair value = 75c. Market No = 60c. Raw edge = 15c. Net edge after fees ~13c.
• Action: Buy NO contracts. [PANEL: Gemini Pro]

Example 5: BTC Weekly Volatility — DVOL Calibrated

• Market: Kalshi CRYPTVOL contract for "Will BTC weekly realized volatility be >60%?"
• Sharp Reference: Deribit DVOL index at 72%. Model calibrated with DVOL suggests P(realized vol >60%) = 65%. Fair value = 0.65.
• Kalshi Price: "Yes" at 52 cents.
• Edge: Raw edge = 13c. Net edge after fees ~11.5c.
• Action: Buy YES contracts. [PANEL: Gemini Pro]

Example 6: Stablecoin Supply Contraction — Polymarket

• Market: Polymarket "USDC supply <$26B by Jul 1"
• Sharp Reference: Chainalysis on-chain data shows $600M net USDC outflow vs. 30-day average of +$200M. Historical precedent: similar outflow levels preceded supply drop to target in 58% of prior cases.
• Polymarket Price: "Yes" at 40 cents. Fair probability: 58%.
• Edge: 58c - 40c = 18c raw. Net after Polymarket fees: ~16c fat tail edge.
• Action: Buy YES on Polymarket. [PANEL: Grok-4-Fast]

IMPORTANT NOTES

• Crypto is 24/7 but prediction market liquidity peaks during US market hours. Time edge-seeking scans accordingly.
• Both Kalshi and Polymarket ladder structures must be scanned for every applicable crypto contract type. They are co-equal first-tier platforms. Kalshi tends to have better fee structure; Polymarket tends to have deeper liquidity on certain crypto contracts. Evaluate each independently.
• Always check USDC peg status before trading on Polymarket. A 2% USDC depeg means every Polymarket contract is worth 2% less than face value.
• The Deribit options chain is the single most valuable data source for pricing crypto prediction market contracts. Prioritize this integration.
• Funding rate signals are mean-reverting — they work best as contrarian indicators. Don't fight a trend just because funding is high.
• Cross-reference every crypto edge with the macro regime. During a risk-off event (VIX spike, credit spread widening), crypto-specific bullish signals are less reliable.
• The Wallet Intelligence desk should be consulted for any Polymarket crypto trade — sharp wallet positioning provides additional confirmation or warning.
• Kalshi fee formula: Price * (1 - Price) * 0.07 — this means fees are highest on 50c contracts (~1.75c) and lower on tail contracts. This makes tail contracts even more attractive on Kalshi net of fees. [PANEL: Gemini Pro]
• For altcoin edges (SOL, etc.) where no Kalshi ladder exists, route to Polymarket niche markets. If Polymarket also has no ladder, hand off to Futures Desk for perp-based execution.
• Gas fee contracts (Kalshi GAS-24H) are a unique alpha source — no other desk is modeling gas with time-of-day seasonality. This is a structural edge. [PANEL: Gemini Pro]