What if a pension system goes insolvent in a major economy?
A pension-system insolvency is a credit-led risk-off: HY spreads widen, financials and crypto-beta (SOL/ETH) soften, but the modeled move is contained absent contagion. Rhymes with the euro-periphery 2010-12 crisis (Greece/Spain bailouts) and the US Detroit/Puerto Rico pension defaults - sharp local credit stress that stayed mostly idiosyncratic. Transmission: the sponsor sovereign/state's bonds and its banks are the epicenter. Forward angle: the real tail is a forced asset fire-sale (the 2022 UK LDI template) that converts a slow insolvency into an acute liquidity event - watch for that, not the headline.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 3–10 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A pension-system insolvency crisis hits a major state or country. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.7% hist -0.5–-0.03% · other way +26.61% (n=12) |
| 2 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -0.6% hist -22.1–+6.5% · other way -1.04% (n=11) |
| 3 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.4% hist -0.48–+1.54% · other way -3.49% (n=12) |
| 4 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.4% hist -0.38–+0.22% · other way +0.35% (n=12) |
| 5 | High-yield credit HYG 📈 chart | Rate | ▼ -0.4% hist -0.62–+0.0% · other way -0.16% (n=12) |
| 6 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -0.4% model prior · unmeasured |
| 7 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -0.4% hist -13.16–+3.19% · other way +4.87% (n=11) |
| 8 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.4% hist -5.87–+1.36% · other way +6.05% (n=11) |
| 9 | Financials XLF 📈 chart | Equity | ▼ -0.3% hist -0.53–+0.06% · other way -0.09% (n=12) |
| 10 | Tech sector XLK 📈 chart | Equity | ▼ -0.3% hist -0.36–+0.29% · other way +0.36% (n=12) |
| 11 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.3% hist -1.36–+0.5% · other way -0.44% (n=12) |
| 12 | JPMorgan JPM 📈 chart | Equity | ▼ -0.2% hist -0.47–+0.59% · other way +1.78% (n=12) |
| 13 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▼ -0.2% hist -7.39–+6.05% · other way +21.75% (n=11) |
| 14 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -0.2% hist -0.33–+0.43% · other way +2.88% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short on SMH/NDX/XLK: the positive realized return is contaminated by First-Republic and post-Lehman V-rebound windows where chips snapped back on Fed liquidity — a pension insolvency offers no such rescue bid.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -19.7% · 5d -13.0% | 90% | 10 | 0.64 | ✓ matches cascade |
| ETH ETH | SHORT | -11.4% · 5d -6.1% | 81% | 15 | 0.47 | ✓ matches cascade |
| US dollar DXY | LONG | +0.9% · 5d +0.2% | 70% | 40 | 0.35 | · |
| Bitcoin BTC | SHORT | -5.0% · 5d -3.3% | 69% | 19 | 0.31 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.4% · 5d +-0.0% | 61% | 39 | 0.18 | ✓ matches cascade |
| 10y yield DGS10 | SHORT | -7bp · 5d -4bp | 59% | 40 | 0.16 | · |
| Gold XAU | SHORT | -1.2% · 5d -0.1% | 55% | 39 | 0.11 | · |
| NDX NDX | LONG | +0.4% · 5d -0.9% ↺ fades | 53% | 40 | 0.06 | ⚠ differs |
| MSTR MSTR | LONG | +0.2% · 5d -1.6% ↺ fades | 43% | 39 | 0.00 | ⚠ differs |
| Volatility VIX | LONG | +1.2% · 5d +2.0% | 38% | 40 | 0.00 | ✓ matches cascade |
| XLF XLF | SHORT | -0.3% · 5d -1.2% | 49% | 39 | 0.00 | ✓ matches cascade |
| XLK XLK | LONG | +0.5% · 5d -0.6% ↺ fades | 49% | 39 | 0.00 | ⚠ differs |
| SPX SPX | SHORT | -1.2% · 5d -0.6% | 41% | 40 | 0.00 | ✓ matches cascade |
| JPM JPM | LONG | +0.7% · 5d -1.4% ↺ fades | 43% | 40 | 0.00 | ⚠ differs |
Why this probability
Pension insolvency crises recur (Greece, US states underfunded); plausible at state level over 3-10yr. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.