An observable increase in crypto-based predictions markets suggests there may be more than a small chance of a U.S. recession in 2025.
Traders at Polymarket now give a 56% chance that a recession hits this year, having climbed 37% in the last few weeks. This market alone has recorded over $1.2 million in trading volume.
Over on Kalshi , a CFTC exchange for predictions, the probability of a recession in 2025 traded at about 60%, with around $1.2 million daily volume.
This growing concern about a recession comes at a time of new economic shocks. On April 2, the U.S. announced tariff increases which will move the average U.S. tariff rate to 29%, the highest it has been in over a century—outpacing even the Smoot-Hawley period in the 1930s, according to the Kobessi Letter.
undefined Source: Census Bureau, USITC, Evercore ISI
Investors are concerned that the protectionist shift could jeopardize global commerce and corporate margins even more, speeding up a downturn.
Important economic indicators support the prediction market movement. Another closely watched recession indicator — the Sahm Rule — is approaching its threshold. This measure activates when the three-month average unemployment rate exceeds its 12-month low by 0.5% points — a signal of slowing labor demand.
Moreover, the yield curve is inverted , a historically reliable recession indicator. In simple terms, short-term interest rates are higher than long-term ones — usually an indication that investors expect slower growth in the years ahead.
According to Barron's , prediction markets, like Polymarket , showed a great deal of promise during the 2024 U.S. presidential election, in their ability to predict winners and losers. On election morning, Polymarket's odds favored Trump by about 20% points over Harris — an accurate reflection of the eventual result.
