Bitcoin’s price is nearly 50% below its October record. Markets have priced in Trump Federal Reserve Chair pick Kevin Warsh as a hawk. With Bitcoin’s price down the pan, investors are now waiting to see what Federal Reserve Chair nominee Kevin Warsh will do to markets if he takes the helm in June. Despite praising Bitcoin and calling for lower interest rates last year, markets initially priced Warsh as a hawk — someone who would keep interest rates high in an aggressive bid to tamp down inflation.
But it’s what Warsh might do with the Fed’s balance sheet that concerns investors. Since the Great Recession, the Fed has purchased trillions of dollars of US Treasury bills, flooding banks, and, in turn, the economy with cash. That policy, known as quantitative easing, stimulated the economy, but it has also led financial markets to be addicted to central bank liquidity, Warsh has said. Dilin Wu, research analyst at forex broker Pepperstone, told DL News it was “very likely” Warsh as Fed Chair could spark more volatility in crypto markets. Aggressive tightening from Warsh could shrink bank reserves just as tech firms ramp up leveraged infrastructure and AI spending. Mismanagement here could trigger stress.
While Warsh is aligned with Trump, who has aggressively pushed for lower interest rates, market observers have said he is a pragmatist who wouldn’t cut too quickly for fear of overheating the economy. This explains Bitcoin’s price dip since Trump announced his nomination. The 14% immediate Bitcoin decline since his nomination reflects market concerns about his hawkish monetary philosophy overriding his crypto-friendly credentials in the near term. Still, experts told DL News that Warsh being a pro-crypto candidate would help Bitcoin in the long-run. Warsh back in 2018 said that Bitcoin could serve as a sustainable store of value, like gold. Marcin Kaźmierczak, Co-Founder of RedStone, a blockchain oracle network, said that while Warsh’s nomination in the short-term spooked markets immediately, a Warsh-led Fed could paradoxically strengthen Bitcoin’s narrative as a hedge against monetary policy risk in the long run due to him being personally sympathetic to the coin.
Factors other than the Warsh nomination are weighing on Bitcoin’s price. One is its narrative divergence, David Lawant, Anchorage Digital’s head of research, said. The asset last year was trading in line with gold as part of the so-called debasement trade — hedging against a currency losing value — but it has since diverged. Bitcoin is now trading more in tandem with non-AI tech assets, a cohort that has struggled over the past few months, Lawant said. A lot of that feels out of place and can correct over time, Lawant said, pointing to the calibre of institutional investment. Bitcoin is unmoved over the past 24 hours, trading for $68,143. Ethereum is up 1% over the past day and is priced at $1,979.
The asset’s price dynamics pull back from the broader macro narrative, with Ethereum mirroring tech-sector optimism and Bitcoin holding near a key level as investors calibrate Warsh’s potential policy path. Market observers continue to weigh the balance between Warsh’s crypto-friendly history and the risk of tighter liquidity.
Leave a Reply