Bitcoin Underprices Tariff Shock Risk

The U.S. Supreme Court's imminent ruling on the legality of sweeping Trump-era tariffs presents a significant, underappreciated risk to risk assets. Prediction markets currently assign only a 23-30% probability to the government prevailing, suggesting a high likelihood of a ruling that could invalidate tariffs on hundreds of billions in imports. Such an outcome would likely trigger a 'tariff shock,' instantly altering global trade flows and injecting volatility into financial markets.

Bitcoin, often viewed as a hedge against systemic risk, appears to be mispricing this event. Current price action shows little evidence of positioning for a potential market dislocation. If the Court rules against the government, the resulting market turbulence could initially pressure Bitcoin alongside traditional assets, testing its uncorrelated asset narrative. However, any sustained market stress could ultimately drive flows toward perceived safe havens.

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