Market bets on political turmoil and monetary policy shifts collide with extreme crypto volatility, presenting asymmetric opportunities in the second half of 2025.
The prediction market landscape in mid-2025 is dominated by two intertwined narratives: unprecedented political uncertainty and a cryptocurrency market at a speculative inflection point. Data from Kalshi, with over $69M in aggregate volume across the ten markets analyzed, reveals traders allocating significant capital to high-impact, low-probability events, suggesting a market environment ripe for volatility spikes and regime shifts. This note dissects the key contracts, identifies inconsistencies and correlations, and provides a framework for actionable trades.
The 'Donald Trump out this year?' contract is the unambiguous core of current political risk pricing. A 50% implied probability is not merely a statistical forecast; it is a signal that market participants are actively hedging against or betting on a constitutional or political crisis. For context, during the peak of the 2020 election controversy or the January 6th hearings, similar contracts never sustained a probability above 20%. The volume—$9.8M, the highest in our dataset—indicates institutional participation.
Key Catalysts & Timeline: The market resolves before January 1, 2026. Key near-term catalysts include Supreme Court rulings on immunity (expected Q3 2025), the sentencing in the NY business fraud case (pending appeal), and the state of the President's health, which has been subject to increased media scrutiny. A 'Yes' resolution would likely involve resignation, incapacity, or removal via the 25th Amendment, as impeachment and conviction before year-end are logistically improbable.
Trading Implication: This is a pure volatility play. At 50%, the market is essentially flipping a coin on an event that would redefine the regulatory and fiscal outlook for every other market. A trader with a view that political stability will hold should consider selling this contract (betting 'No'), as the probability appears elevated relative to historical precedents. However, this requires a high risk tolerance given the binary outcome.
The Bitcoin markets present a puzzle: immense volume concentrated on low-probability outcomes. The 'Bitcoin above $100,000' contract (11%) is the most telling of the 'base case' bull scenario. Its probability has likely declined from highs earlier in the year as BTC consolidated below its March 2025 all-time high.
Structural Analysis:
Correlation & Catalysts: Bitcoin's path is increasingly tied to political outcomes. A Trump exit could initially cause risk-off volatility, potentially triggering the $80K scenario. Conversely, a Trump administration viewed as crypto-friendly (e.g., through veto of hostile legislation or favorable SEC appointments) could provide the catalyst for a push past $100K. The launch of spot Ethereum ETFs in late Q3 2025 is a more immediate, positive catalyst for the broader crypto complex, potentially lifting the Ethereum $5,000+ contract (currently 2%) as a correlated play.
Trading Implication: Consider a broken wing butterfly strategy: Buy the $100K call (11%), sell the $130K call (1%) to finance part of it, and buy the $80K put (20%) as a hedge. This structure benefits from a moderate rally while defining risk, aligning with the market's implied range-bound but volatile outlook.
The Federal Reserve-related markets are currently pricing a 'steady at the helm' scenario with puzzling political overlays.
The Powell-Hassett Disconnect: The minute 1% probability of 'Powell leaves before 2026' reflects market belief in institutional stability and Powell's stated intent to serve his full term ending May 2026. However, the 'Trump nominates Kevin Hassett' contract at 38% is a major anomaly. Kevin Hassett, former Trump CEA chair, is a plausible candidate, but only if a vacancy occurs. The contract's long deadline (Jan 2029) explains some of this—it may be pricing a post-2026 nomination. However, if the 50% Trump exit probability is realized, the path for a Hassett nomination narrows dramatically.
Rate Cut Pricing: The 'Will the Fed cut rates 2 times?' contract at 6% is consistent with Fed Funds futures, which currently price in fewer than two 25-bps cuts by year-end. This market is likely being suppressed by sticky inflation data and strong employment figures from H1 2025. A political shock (Trump exit) could alter this trajectory: sudden economic uncertainty could prompt a more dovish Fed, increasing this probability rapidly.
Trading Implication: This nexus offers a conditional pairs trade:
The Philadelphia Eagles Super Bowl contract (10% probability, $5.6M volume) may seem out of place but serves as a useful volatility and liquidity benchmark. A 10% probability aligns roughly with top-tier NFL contenders in preseason models. The high volume indicates healthy liquidity in Kalshi's sportsbook, a positive sign for the platform's depth.
More importantly, it acts as a non-correlated asset relative to political and crypto markets. In a portfolio of prediction market bets, including such uncorrelated contracts can reduce overall portfolio volatility. For traders, it's a reminder that not all high-volume markets are driven by the same macro factors.
The current prediction market landscape presents three primary axes of uncertainty:
Recommended Actionable Insights:
Monitoring Catalysts:
Current Probability: 0.5%
The centerpiece of the Kalshi landscape is the 'Trump out this year?' contract, trading at a staggering 50% probability with $9.8M in volume. This is an extraordinary implied probability for an event of this magnitude within a six-month window. Historically, such high probabilities for a sitting president's early exit are rare and typically associated with acute constitutional or health crises. The market appears to be pricing in a significant, non-electoral risk factor—potentially related to legal outcomes, health, or a resignation—rather than a standard electoral defeat (which would occur post-Jan 1, 2026). This single contract acts as a gravitational force, distorting probabilities in linked markets like Fed Chair succession and fiscal policy stability. Traders should note this is a binary, high-impact event; a resolution to 'Yes' would trigger seismic repricing across all policy-dependent markets.
Current Probability: 0.1%
The collection of Bitcoin contracts reveals a market in violent disagreement about direction but with low conviction on extremes. The $100K-by-year-end contract at 11% and the $130K+ contract at 1% suggest a path-dependent, 'clustered' bull case where a breakout above $100K is seen as plausible but not likely, and a surge beyond $130K is considered a tail risk. Conversely, the 'How low?' contract at $80K.01+ (20% probability) indicates a non-trivial chance of a ~20% drawdown from current ~$100K levels. The structure is odd: high volume ($9.7M for $130K+) but extremely low probability, indicating either a large 'lottery ticket' bid or a sophisticated hedge. Compared to Q1 2025's bullish consensus, this reflects a market digesting consolidation and regulatory overhangs. The asymmetry lies in the fact that a move above $100K could rapidly increase probabilities for the $130K+ bucket, offering convexity.
Current Probability: 0.4%
This triad of markets forms a tightly correlated policy nexus. Powell's departure is priced at a mere 1% ($6.4M volume), suggesting extreme confidence in his tenure through 2025. However, the Hassett nomination contract at 38% ($5M volume) presents a glaring inconsistency. If Powell is almost certain to stay, a Hassett nomination—which would require a vacancy—should be similarly low. The resolution may lie in the Trump exit market: a 50% chance of Trump's departure could be suppressing the Powell exit probability, as traders see Powell potentially leaving only under a new administration. The Hassett contract, conversely, may be pricing in a future nomination (the contract expires Jan 20, 2029). The 2-cut contract at 6% is remarkably low, aligning with a 'higher for longer' Fed stance but conflicting with potential political pressure from a Trump or successor administration. This complex offers a relative value opportunity: short Hassett/long Powell exit if one believes the 50% Trump exit probability is overstated.