Major policy and tech markets display a high-impact divergence between volatility and central tendencies. The 'Trump out' market at 50% suggests profound election or legal uncertainty, while low-probability tails for Bitcoin and recession imply suppressed systemic risk perceptions. We see actionable convexity in multiple instruments.
The Kalshi prediction markets, as of this analysis, present a landscape defined by extreme binary risk in politics, subdued expectations for crypto euphoria, and striking complacency in macroeconomic outcomes. The headline figure—a 50% chance of President Donald Trump leaving office before year-end—dominates the risk spectrum and influences cross-asset assumptions. This note dissects the ten highest-volume markets on the Policy & Tech desk, identifying actionable dislocations, cross-market correlations, and underappreciated catalysts. The aggregate data suggests traders are positioned for a volatile political autumn but a stable macroeconomic and financial environment, a combination that historically has proven fragile.
The 'Donald Trump out this year?' market, with $9.8M in volume, is the central political risk barometer. A 50.0% probability is an extraordinary implied odds for an incumbent's departure. Historically, even unpopular incumbents see re-election probabilities above 60% at this point in the cycle. This pricing incorporates multiple exit vectors: electoral defeat, legal removal (e.g., sentencing post-July), or health issues. The market's sensitivity will be extreme. Key near-term catalysts include: the June 27 debate performance and subsequent polls, any Supreme Court ruling on presidential immunity (expected late June), and the July 11 sentencing hearing in the New York case. A ruling granting broad immunity could crash this probability toward 30%; a harsh sentencing narrative could push it above 60%. For traders, this market offers pure volatility exposure. Selling volatility (i.e., taking a position that the probability will stabilize) may be premature until these events pass. A pairs trade—long this market, short the 'Trump wins election' market on Polymarket or Betfair—could capture mispricing between different contract specifications.
The crypto markets reveal a cautious, institutionalized asset class. The 1% probabilities for Bitcoin reaching $130k or $150k in 2024 are stark. Given current prices near $110k, this requires only a ~18-36% rally—historically trivial for Bitcoin in a bull market. The market is saying such a rally is 99% improbable. This reflects a belief that the post-ETF institutional inflow story is fully priced and that macro headwinds (treasury yields, dollar strength) cap upside. Conversely, the 20% chance of Bitcoin falling to $80k (a ~27% decline) is meaningful. This is likely a hedge against a broad risk-off move. The asymmetry is actionable: the cost of downside protection (implied in the 20% probability) is high relative to upside lottery tickets (1%). A structured play: sell the 'Bitcoin below $80k' contract (betting against the 20% probability) and use the premium to buy a basket of the high-side contracts ($130k+ and $150k+). This captures the volatility skew. For Ethereum, the 2% for $5k is marginally more optimistic but tells a similar story.
The trio of Powell departure (1%), two Fed cuts (6%), and 2025 recession (1%) paint a picture of remarkable calm. This complacency is the most striking finding in our analysis. The 1% recession probability is disconnected from leading indicators like the inverted yield curve, which has a historical 70%+ predictive power for recession within 24 months. Even in 'soft landing' scenarios, recession odds are rarely priced below 10-15%. This market is a prime candidate for a convex long: risking 1 cent to make 99 cents if a recession occurs. The catalyst timeline is long (any two-quarter period in 2024-25), providing ample runway. The Powell market at 1% is likely correct in a vacuum but fails to condition on the 50% 'Trump out' market. If Trump loses, Powell likely stays. If Trump wins, his public criticism of Powell and desire for a dovish chair raise the odds of non-renewal or pressure to resign. A conditional probability argument suggests the true odds should be higher. The '2 cuts' market at 6% aligns with Fed dot plots but may underestimate global disinflation momentum. If CPI prints continue to cool, this probability could rise swiftly.
The Kevin Hassett market is a sleeper. At 38% with $5M volume, it reflects strong informed confidence. Hassett is a credible, dovish-leaning economist with Trump ties. The market is likely pricing a scenario where Trump wins, Powell is not renewed (or resigns), and Hassett is the compromise pick—acceptable to both Trump's instincts and Senate Republicans. The probability seems high relative to public discourse, suggesting the 'smart money' is already positioned. For traders, monitoring Google Trends and news volume for 'Hassett Fed' is crucial. A spike in media mentions will be a leading indicator for a probability jump. The risk is that Trump prefers a more controversial figure (like Judy Shelton), which would crater this market. Given the 38% is not an overwhelming favorite, there is still room for this to become a consensus trade, pushing probability to 60%+ post-election if Trump wins.
Our cross-market synthesis reveals two primary arbitrage themes and one overarching risk. First, the Political-Macro Disconnect: The high probability of Trump exiting contradicts the low probability of Powell exiting and a recession. These should be correlated. A trade structuring a long on recession (1%) and Powell exit (1%), funded by a short on 'Trump stays,' captures this dislocation. Second, the Crypto Volatility Skew: The rich pricing of downside (20%) versus upside (1%) is an opportunity for volatility sellers on the downside or lottery buyers on the upside. Third, the Overarching Risk: The collective low probabilities in macro markets (recession, Fed cuts, Powell exit) suggest a 'Goldilocks' consensus. Any major data shock (hot CPI, weak jobs, banking stress) could force a violent repricing across all these markets simultaneously, as correlations converge to 1 during panic. Portfolios should stress-test for such a regime shift.
Current Probability: 50.0%
'Donald Trump out this year?' at 50.0% – A Market Implying Binary Existential Risk
Current Probability: 50.0%
The core political volatility instrument on Kalshi. A 50% probability is exceptionally high for an incumbent leaving office within a year, indicating the market views election loss or legal/health incapacitation as a coin flip. This is not a modal outcome; it's a pricing of profound uncertainty. The massive $9.8M volume confirms this as the dominant political risk trade. Historically, such even-money pricing for an incumbent exit is rare outside of extraordinary crises. The market will react violently to: 1) Major swing state polls post-debates, 2) Any Supreme Court rulings on immunity or sentencing, 3) Health disclosures. The current price suggests traders are either hedging against a political regime shift or speculating on a polling breakdown. Given the volume, liquidity is strong for both entry and exit.
Current Probability: 20.0%
Cryptocurrency Buckets Show Asymmetric Risk Perceptions
Current Probability: 1.0%
Three distinct Bitcoin markets and one for Ethereum reveal a consensus view: explosive upside is seen as remote, but meaningful downside is plausible. The 1% probability for Bitcoin reaching $130k or $150k suggests traders assign a near-zero chance of a 2021-style melt-up, likely due to macro constraints (higher rates, ETF flows normalizing). Conversely, a 20% chance of Bitcoin falling to $80k (from ~$110k as of this writing) is non-trivial. This 20% tail risk is likely pricing in a sharp equity correction, a hawkish Fed pivot, or regulatory shocks. Ethereum's 2% chance of hitting $5k is slightly higher but similarly subdued. The asymmetry is clear: the crowd is buying downside protection more eagerly than lottery tickets for new all-time highs. This creates potential value in selling the $80k put wing if one has a strong bullish view, as implied volatility for downside appears rich relative to upside.
Current Probability: 1.0%
Macro Policy Stability Priced as Near-Certain
Current Probability: 6.0%
The combined narrative from the Powell (1% departure), Fed cuts (6% for two cuts), and recession (1%) markets is one of remarkable expected stability. A 1% chance of Powell leaving implies near-certainty he serves his full term until 2026, aligning with historical norms for Fed chairs absent political pressure. The critical disconnect: the 'Trump out' market at 50% would, in a standard political model, increase the odds of a Powell resignation or replacement post-election. These markets are not cross-hedged, presenting an arbitrage: if you are long 'Trump out,' you should also see a higher probability of Powell departure, yet the market says 1%. This is either a massive oversight or reflects a belief that Trump would retain Powell. Similarly, a 1% recession probability is extreme, even for an election year with resilient data. It leaves no room for exogenous shocks (geopolitical, financial accidents). This complacency is a contra-indicator; buying recession hedges at 1% offers massive convexity.
Current Probability: 38.0%
Kevin Hassett Fed Chair Nomination: The High-Conviction, Low-Profile Trade
Current Probability: 38.0%
This market is an outlier in its specificity and elevated probability without major media narrative. At 38%, it implies Hassett is the clear frontrunner in the prediction market's mind for a Trump nomination. Hassett, former Trump CEA chair and a known economist, fits the profile but is not the subject of widespread reporting. The 38% is strikingly high for an event so contingent (first, Trump must win; second, he must choose not to reappoint Powell; third, he must pick Hassett). This suggests insider confidence or sophisticated modeling based on Trump's known preferences. For traders, this is a pure event-driven play. If media chatter begins on a 'shortlist' that includes Hassett, this probability could jump to 60%+ rapidly. If other names (Judy Shelton, John Allison) gain traction, it could collapse. At 38%, it's priced for meaningful but not overwhelming confidence, leaving room for movement.
Current Probability: 10.0%
Philadelphia Eagles Championship: A Pure Sports Alpha Opportunity?
Current Probability: 10.0%
Trading at 10%, this market implies the Eagles have a 1-in-10 shot to win Super Bowl LXI (2026 season). This is a typical pre-season probability for a strong but not elite contender. For context, betting markets currently place the Eagles' odds around +1600 to +2000, which translates to an implied probability of 5-6%. The Kalshi 10% is therefore significantly more bullish than traditional sportsbooks. This discrepancy could reflect: 1) Kalshi trader home-team bias (Philly-based exchange?), 2) Different assessment of roster moves, or 3) Timing differences (this market spans two seasons). For the sophisticated trader, this divergence from established sportsbooks is an opportunity. If you trust bookmakers' odds more, selling this 10% probability is attractive. However, prediction markets have been known to outperform betting markets in some political contexts; the same may hold for sports if the crowd has superior collective intelligence.