Supreme Court Ruling: Bitcoin Crash Imminent?

Supreme Court Tariff Ruling: Will It Trigger a Bitcoin Market Shock?

The US Supreme Court’s return from a four-week break on January 9th brings with it a potentially significant economic event: a ruling on whether the Trump administration lawfully imposed sweeping tariffs under emergency powers. The case hinges on whether these duties on hundreds of billions of dollars in imports violated Congressional limits. Currently, prediction markets give the government a relatively low probability of winning – between 23% and 30%. Treasury officials estimate potential refunds could reach tens of billions, with lost revenue potentially exceeding several hundred billion dollars over the next decade if the tariffs are struck down. Interestingly, despite the potential for a major macroeconomic shift, Bitcoin and broader financial markets haven’t fully priced in this risk, creating a disconnect that warrants closer examination. This article dives deep into the implications of the Supreme Court’s decision, analyzing its potential impact on traditional markets and the cryptocurrency space, particularly Bitcoin.

The Case Against the Tariffs: A Legal Challenge

The core of the dispute lies in the use of the International Emergency Economic Powers Act (IEEPA) of 1977. Originally intended for national security threats, the Trump administration invoked IEEPA in April 2025 to justify the “Liberation Day” tariffs. Two lower courts have already ruled against the administration, arguing that IEEPA was stretched beyond its intended Congressional scope. The Supreme Court heard arguments in November, and justices across the ideological spectrum expressed skepticism towards the government’s position. These tariffs currently account for roughly half of total US tariff revenue and contributed significantly to inflationary pressures in 2025, marking the worst year for the dollar since 2017.

Prediction Markets Weigh In

Prediction markets offer a fascinating glimpse into the collective wisdom of traders. Polymarket currently predicts a 77% chance the Supreme Court will rule against the Trump administration, while Kalshi gives a slightly lower probability of 69%. However, a niche market for importers selling potential refund claims to hedge funds suggests a more nuanced view. These claims are trading around 20-30 cents on the dollar, which analysts translate to a 40-45% probability of the government winning. This discrepancy highlights the uncertainty surrounding the ruling and suggests the potential for significant volatility if the outcome surprises the market.

Bitcoin's Surprisingly Calm Response

Despite the potential for a substantial macroeconomic event, Bitcoin derivatives markets show a surprising lack of directional bias. Seven-day implied volatility is near multi-month lows, and the 25-delta skew is tilted towards calls, indicating a preference for bullish options. Futures funding rates, hovering around 0.0076% to 0.0094% per eight hours (according to CoinGlass data), remain well below levels typically associated with excessive leverage. This contrasts sharply with the anticipation surrounding the ruling in Washington and on prediction platforms.

Macroeconomic Context: A Disconnect

The broader macroeconomic picture adds to the intrigue. The dollar index is down 9.5% year-over-year, ten-year Treasury yields are around 4.2%, and equity markets closed 2025 near record highs. This seemingly positive environment clashes with the potential for a “tariff shock.” The disconnect is stark: traditional markets are bracing for a binary outcome, while Bitcoin and cross-asset markets remain relatively unfazed.

Potential Scenarios and Bitcoin's Reaction

Let's explore the potential outcomes and how Bitcoin might react:

Scenario 1: Tariffs Upheld – A Surprise Risk-Off Event

If the Supreme Court upholds the tariffs, it would be a significant surprise, defying prediction market consensus. The immediate reaction would likely be:

• Higher import prices and stickier inflation: This would erode confidence in the Federal Reserve’s ability to achieve its inflation target.
• A stronger dollar and higher real yields: This would create a risk-off environment for equities.
• Initial Bitcoin sell-off: Bitcoin would likely trade down with other high-beta assets, mirroring a firmer DXY and weaker S&P 500.

However, a slower narrative could emerge. Persistent tariffs could reinforce the perception of US policy risk and fiscal fragility, potentially leading to a resurgence of the “digital gold” and “outside money” narratives, ultimately benefiting Bitcoin in the long run.

Scenario 2: Tariffs Struck Down – A Disinflationary Tailwind

The more likely scenario, according to current predictions, is that the Supreme Court will strike down the tariffs. This would be viewed as:

• A disinflationary supply-side shock: Reducing import costs would ease inflationary pressures.
• Potential corporate stimulus: Refunds could provide a boost to corporate earnings.
• Positive for equities and global growth: A more favorable economic outlook would likely drive stock prices higher.

In this scenario, Bitcoin would likely benefit from the broader risk-on sentiment, particularly if lower yields revive the “liquidity and carry” trade that fueled the 2025 ETF inflows. However, the reaction could be muted if the market has already priced in this outcome. A crowded long position in Bitcoin derivatives could lead to a “good news, sell the fact” scenario, with a brief pop followed by a mean reversion.

Derivatives Market Insights

Analyzing Bitcoin derivatives provides further clues about market expectations:

• Deribit’s Volatility Index (DVOL): Rose from 43 on January 1st to 46.4 on January 5th, but remains near its lowest levels since late November, suggesting limited anticipation of a major volatility spike.
• 25-Delta Call-Put Skew: Mildly negative (-1.3 vols for both 1-week and 1-month maturities), indicating a slight preference for downside protection but not a strong speculative bet on a price decline.
• Funding Rates: Remain moderate, well below levels that would signal excessive leverage.
• Open Interest: Swollen above $60 billion, indicating significant leverage in the system, but not necessarily positioned for a specific outcome.

The high level of open interest suggests that a surprise ruling, in either direction, could trigger a significant repricing of positions.

What Does "Priced In" Actually Mean?

While prediction markets suggest a direction, neither cross-asset markets nor Bitcoin derivatives show a large “tariff shock” premium. This doesn’t mean the ruling will be inconsequential; it simply means the market’s reaction will depend heavily on whether the outcome surprises relative to current positioning. A surprise upholding of the tariffs would likely trigger a more substantial volatility spike than a confirmation of their removal.

Conclusion: A Tradable Opportunity

The Supreme Court’s tariff ruling presents a potentially tradable opportunity for astute market participants. The current setup suggests that either outcome could produce a significant move in Bitcoin, but neither is so predetermined that the ruling will be a non-event. The ruling won’t fundamentally reshape Bitcoin’s long-term trajectory, but it will clarify which macroeconomic narrative dominates the coming weeks: reflation and dollar strength if the tariffs remain, or disinflation and risk-on flows if they fall. The derivatives market isn’t screaming about it yet, which means there’s still alpha to be found in paying attention.

Mentioned in this article

Bitcoin CoinGlass Deribit Polymarket Kalshi Donald Trump