Aggregate market data from prediction platform Kalshi shows traders are pricing in high conviction for significant Fed easing by year-end, a surprisingly elevated probability of political disruption, and a crypto market positioned for major volatility with a bullish skew. Our analysis identifies specific trade structures to express macro views.
The Kalshi prediction market data presents a macro landscape defined by three core, interconnected narratives: overwhelming anticipation of Federal Reserve easing, a strikingly high implied probability of a disruptive political event, and a cryptocurrency complex poised between near-term caution and explosive longer-term bullishness. This research note synthesizes these signals, evaluates their internal consistency, and proposes actionable trade ideas for clients of the Macro & Rates Desk. The aggregate volume of over $63M across these ten key markets underscores significant capital commitment to these themes.
The centerpiece of the rates complex is the 98% probability priced into 'Will the Fed cut rates 3 times?' (75 bps of cuts). This is a statement of exceptional conviction. Historically, prediction market probabilities above 95% for a specific Fed path are rare and typically precede FOMC meetings with near-certain outcomes. The current pricing suggests traders see recent inflation and labor market softening as not merely transitory but as the beginning of a trend necessitating a sustained easing cycle. The ancillary market, 'Will the Fed cut rates 2 times?' (50 bps), trades at a mere 6% probability, indicating the market sees the modal outcome as three cuts, with the risk skewed toward more cuts (a four-or-more cut scenario) rather than fewer. This is further corroborated by the 1% probability for 'Powell leaves before 2026?', which removes leadership transition as a meaningful risk to the dovish outlook. The market is effectively saying the cutting cycle is about the economic data, not about Fed personnel.
The 50% probability assigned to 'Donald Trump out this year?' is the most politically significant signal in the dataset. This is not a standard re-election probability market; it specifically prices the chance of the incumbent leaving office before January 1, 2026. A 50% implied probability is extraordinarily high for an event that would typically be considered a tail risk in a stable political system. The market is pricing in a substantial risk premium for events such as resignation, incapacitation, or removal via constitutional mechanisms. This probability likely reflects heightened geopolitical tensions, the intense polarization of the domestic political environment, and perhaps market interpretations of event volatility surrounding the upcoming election and its aftermath. For macro traders, this is a critical volatility input. It suggests that political risk, not economic fundamentals alone, could be the dominant driver of asset price volatility in H2 2025.
The Bitcoin markets present a nuanced, multi-timeframe picture. The near-term target of $100,000 by year-end holds an 11% probability. This is a non-trivial chance, but it reflects the known headwinds of potential post-halving consolidation and macro uncertainty. More revealing is the suite of 'how high' markets. The probabilities decay in a pattern that suggests a 'volatility smile' familiar to options traders: 1% for $130k, 2% for $140k, and 1% for $150k. This indicates that while the median expectation may be below $100k, the right tail of the distribution is fat—traders see a low-probability but high-impact chance of a parabolic move. Conversely, the 'How low will Bitcoin get this year?' market shows a 20% probability for a decline only to $80,000.01 or above, implying a perceived floor well above previous cycle lows. The structure suggests a market positioning for a potential explosion upward following a period of choppiness, a pattern consistent with post-halving year dynamics.
A. Selling Political Volatility (Relative Value): The 50% probability for Trump's early exit appears rich compared to longer-dated volatility measures in other asset classes (e.g., VIX term structure). A tactical trade would be to sell this contract, effectively collecting the high risk premium. The hedge would be via long positions in broad equity volatility (VIX calls) or steepeners in Treasury volatility, which would pay off in a true crisis scenario but are less binary than the political event itself. B. Expressing the Dovish Fed View: With a 98% probability, the '3 cuts' market offers little value outright. However, a steepener can be constructed: Go long the '3 cuts' contract (98c) and short the '2 cuts' contract (6c) in a ratio that reflects their relative probabilities. This basket profits if the conviction for three cuts strengthens further or if the probability of a shallower two-cut cycle collapses toward zero. It is a pure play on the maintenance of a dovish consensus. C. Constructing a Bitcoin Asymmetric Payout: Instead of buying the low-probability $150k contract outright, create a call spread using prediction markets: Buy the $100k year-end contract (11% probability, lower strike) and sell the $150k contract (1% probability, higher strike) in a 1:1 ratio. This reduces the upfront cost (net probability cost ~10%) and defines the maximum payout, optimizing for a move to, for example, $120k-$130k where the maximum payoff is achieved. This replicates a bullish call spread strategy using binary outcomes.
For Fed Narrative: The primary risk is a reacceleration of inflation or wage growth, forcing the Fed to pause or signal fewer cuts. This would cause a violent repricing in the '3 cuts' market and a surge in the '2 cuts' probability. Key catalysts are the next two CPI prints and Non-Farm Payrolls reports. For Political Risk: The probability is highly sensitive to news headlines, debates, and geopolitical events. A single major adverse event could quickly validate the 50% price, leading to sharp moves. This market is for risk capital only. For Crypto: The major catalyst is the evolution of the macro liquidity environment post-Fed cuts. Additionally, regulatory clarity (or lack thereof) for spot ETH ETFs and unexpected technological developments (e.g., Ethereum's Pectra upgrade) could drive Ethereum's underperformance or outperformance relative to Bitcoin.
The Kalshi markets paint a picture of a pivotal and potentially volatile second half of 2025. The consensus is powerfully dovish on rates, nervously elevated on political stability, and cautiously bullish with a leveraged upside bet on cryptocurrencies. The most striking dislocation is the 50% political risk premium, which offers a compelling opportunity for volatility sellers with appropriate hedging. The Fed pricing, while seemingly one-sided, can be traded via curve structures. Finally, the crypto markets provide a clear framework for constructing defined-risk, high-asymmetry positions that align with the historical post-halving trajectory. We recommend clients use these binary markets not just as forecasts, but as building blocks for structured macro expressions.
Current Probability: 98.0%
Federal Reserve Policy: A Dovish Consensus
Current Probability: 50.0%
Presidential Stability: A Tectonic Risk Premium
Current Probability: 11.0%
Cryptocurrency Trajectory: Pricing the Halving and Beyond