Geopolitical Risk & Policy Volatility: Trump's 50% Exit Probability Drives Market Uncertainty

Key Takeaways

• The 'Trump Out' market at 50% probability is a key pivot point for all geopolitical and policy-related markets, creating asymmetric risk across the board.
• Crypto markets exhibit a bullish but cautious stance, with low probabilities assigned to extreme highs and a significant 20% chance of Bitcoin staying above $80k, suggesting a 'higher floor' consensus.
• Policy markets are overwhelmingly pricing in stability for Powell's tenure and the current economic cycle, but are beginning to discount a radical shift in Fed leadership under a second Trump term.

Executive Summary: A Tale of Two Volatilities

The prediction markets for Q2 2024 present a landscape dominated by two colossal themes: unprecedented political volatility centered on the Trump presidency, and a maturing but still speculative crypto asset class. The Geopolitics Desk's analysis of ten high-volume markets on Kalshi reveals a market psyche attempting to price stability where it can (the Fed, the macro cycle) while bracing for potential regime change in both the White House and, looking ahead, at the Federal Reserve. The ‘Donald Trump out this year?’ contract, trading at a coin-flip 50% probability with nearly $10 million in volume, acts as the keystone for all other policy-related markets, injecting a high degree of binary risk into the 2025 outlook.

Market Deep Dive: The 50% Sword of Damocles

Trading at 50.0% with high volume, this market is the single most important barometer of political risk. This is not a prediction of electoral defeat, but of a pre-2026 exit from office. The implied probability is historically elevated for a sitting president. Traders appear to be weighing several non-mutually exclusive catalysts:

1. Health & Age: The advanced age of the candidate is a constant, non-partisan risk factor priced into long-dated political markets.
2. Political & Legal Pressures: The market may be discounting the possibility of successful political maneuvers (e.g., actions stemming from ongoing legal cases) that could create untenable pressure.
3. Voluntary Departure: While unlikely, scenarios involving strategic resignation for non-health reasons are non-zero probabilities.

Actionable Insight: This market creates asymmetric opportunities. A ‘Yes’ position is a high-risk, high-reward volatility play that could appreciate rapidly on a negative health or political headline. A ‘No’ position is essentially a bet on stability and continuity; if the probability drifts down from 50% on a lack of adverse catalysts, this could offer a positive carry trade. All traders should use this market as a hedge ratio for positions in related policy markets (Fed Chair, regulation).

Bitcoin’s Asymmetric Floor: $80K as the New Baseline

The crypto markets here tell a story of tempered bullishness. The extreme high-price targets ($130k+, $150k+) are given only a 1% chance, suggesting the era of easy 10x gains is seen as over. The more critical data point is the ‘How low will Bitcoin get this year?’ market. An 80% implied probability that Bitcoin will trade below $80,000 at some point in 2025 acknowledges significant expected volatility and potential drawdowns. However, the 20% chance it never breaches $80k establishes that level as a new, consensus ‘hard floor’—a monumental re-rating from the $20k-$30k support zones of the previous cycle.

Actionable Insight: The structure suggests a range-trading environment is anticipated. Strategies could include selling volatility (if platforms allow) around the $80k-$130k range, or accumulating at or near the $80k level with a long-term view. The disparity between Bitcoin and Ethereum highs (2% vs. 1% for more extreme targets) continues to favor Bitcoin as the institutional and macro asset, suggesting ETH may continue to underperform on a BTC-pair basis.

The Federal Reserve Dichotomy: Powell’s Iron Grip vs. Hassett’s Shadow

The juxtaposition of the Powell (1% to leave) and Hassett (38% to be next nominee) markets is a masterclass in term-structure pricing. The market makes a clear distinction:

• Near-Term (2025-2026): Jerome Powell’s position is considered rock-solid. The 1% probability is a bet on institutional inertia and the severe reputational damage any president would incur by forcing out a Fed Chair. This price assumes political turbulence does not spill into Fed independence.
• Medium-Term (2026-2029): Kevin Hassett’s 38% probability is a startlingly specific bet on Trump’s second-term agenda. Hassett, a former CEA chair known for his dovish tendencies and loyalty to Trump, represents a clear departure from the traditional central banker mold. This market is pricing in a high likelihood of a politicized Fed appointment post-2026.

Actionable Insight: These markets are not contradictory but complementary. A long position in ‘Powell Stays’ (i.e., ‘No’ on him leaving) paired with a long position in ‘Hassett Next Nominee’ is a structured bet on: 1) short-term policy stability, followed by 2) a high probability of a dovish, Trump-aligned Fed Chair later. This term structure play could hedge against different political outcomes.

The Complacency in Macro Consensus: A Soft Landing Priced to Perfection

The near-zero probability of a 2025 recession (1%) and minimal chance of two Fed cuts (6%) reflect a Goldilocks consensus that is potentially vulnerable to shocks. This pricing largely dismisses the historical inevitability of the business cycle and assumes inflation will continue to gently cool without a significant downturn in employment.

Key Risk Factors:

1. Lagging Data: Prediction markets can be slow to price in slowly building macro deteriorations until they appear in hard data.
2. Geopolitical Supply Shocks: An escalation in global conflicts could reignite inflation, forcing the Fed to hold or even hike, breaking the soft-landing narrative.
3. Credit Event: High interest rates have been sustained for longer than many expected, increasing stress in commercial real estate and private credit markets.

Actionable Insight: The ‘Recession 2025’ contract at 1% is a classic, high-risk tail hedge. While likely to expire worthless, a small position could pay out massively if macro conditions deteriorate. It serves as cheap portfolio insurance for traders with large exposures to cyclical assets or the ‘soft landing’ narrative embedded in other markets.

Conclusion & Synthesis: Navigating the Binary Landscape

The high-volume markets analyzed point to a second half of 2024 and a 2025 defined by binary political risk and crypto consolidation. The 50% probability on a Trump exit is the single largest source of uncertainty, affecting every asset class. Bitcoin markets are building a higher foundation but expecting volatile, range-bound action rather than a moonshot. Meanwhile, the Fed outlook is bifurcated between near-term steadfastness and medium-term potential politicization.

Forward-Looking Catalysts:

• Political Conventions & Election (Nov 2024): The ‘Trump Out’ market will be highly sensitive to the election result. A Trump loss would resolve it to ‘No,’ but a win could see the probability recalibrate based on his health and post-election political dynamics.
• Bitcoin ETF Flows & Halving Aftermath: Sustained ETF inflows could challenge the low probabilities assigned to extreme highs, while any stagnation could test the $80k floor thesis.
• Fed Meetings & CPI Prints: Any deviation from the soft-landing script (hotter inflation or rising unemployment) will violently reprice the recession and rate-cut markets.

Traders should structure their portfolios to account for the fat-tail risk emanating from the political sphere while seeking relative value in the more analytically grounded crypto and macro policy markets.

Market Analysis

Donald Trump out this year? ➡️

Current Probability: 50.0%

The 'Donald Trump out this year?' market at 50.0% with $9.8M in volume is the central nervous system of the current prediction market landscape. This binary outcome effectively functions as a volatility index for U.S. political risk. The even-money pricing indicates a market deeply uncertain about the stability of the Trump presidency through 2025. Historically, such high implied volatility for a sitting president this early in a term is rare. The market is likely synthesizing several risk vectors: health (given the candidate's age), political (e.g., success of legislative maneuvers or legal challenges that could force resignation), and exogenous shocks. This market's resolution will have profound knock-on effects for every other policy-related contract.

How high will Bitcoin get this year? 📈

Current Probability: 1.0%

The cluster of Bitcoin price markets reveals a nuanced narrative. The 1% probability for BTC >$130k and >$150k suggests traders see a low likelihood of a parabolic, 2021-style melt-up in 2025. However, the 'How low will Bitcoin get this year?' market, showing a 20% probability for staying above $80k, is arguably more informative. This implies an 80% chance Bitcoin dips below $80k at some point, but the 20% tail for it never breaching that floor indicates strong belief in a significantly elevated support level compared to previous cycles. The high volumes ($9.7M, $5.4M, $4.6M) confirm crypto remains a dominant theme. The Ethereum >$5k contract at 2% probability lags, reflecting its continued performance divergence from Bitcoin and lower perceived odds of an ETH-specific catalyst.

Powell leaves before 2026? 📉

Current Probability: 1.0%

The 'Powell leaves before 2026?' market at a mere 1.0% probability ($6.4M volume) is a stark indicator of perceived institutional stability. The market overwhelmingly expects Jerome Powell to serve out his full term as Fed Chair, which ends in May 2026. This is a powerful consensus bet on continuity in monetary policy machinery through the end of next year, irrespective of the political turmoil implied by the Trump market. This confidence likely stems from the historical precedent of Fed chairs retaining independence and the high political cost of removing one prematurely.

Will Trump next nominate Kevin Hassett as Fed Chair? ➡️

Current Probability: 38.0%

The 'Will Trump next nominate Kevin Hassett as Fed Chair?' market at 38.0% ($5.0M volume) is the most fascinating policy contract on the board. It exists in direct tension with the Powell market. Here, traders are looking beyond 2026 to the next Fed Chair nomination (post-Powell's term). A 38% probability for a specific individual—Kevin Hassett, a former Trump economic advisor—is extraordinarily high. It signals that a) markets believe Trump is likely to be in a position to make that nomination (winning in 2024 and serving into 2029), and b) there is credible insider information or strong rationale pointing to Hassett as a favored candidate. This market is a pure play on Trump's second-term policy alignment, suggesting a preference for a more politically aligned, perhaps dovish, Fed Chair.

Will the Fed cut rates 2 times? ➡️

Current Probability: 6.0%

The 'Will the Fed cut rates 2 times?' (50 bps) market at 6.0% and the 'Will there be a recession in 2025?' market at 1.0% paint a coherent picture of economic optimism. A 6% chance of two 25bp cuts implies the most likely Fed path is either on hold or perhaps only one cut. The near-zero probability of a recession (two consecutive negative quarters) in 2025 is a striking declaration of faith in a 'soft landing' scenario extending well into next year. These markets have significant exposure to being wrong-footed by sudden labor market weakening or inflation re-acceleration.