Is Kevin Warsh’s Fed Chair Nomination Bullish or Bearish for Bitcoin?

There continues to be debates on whether to expect a hawkish Federal Reserve if Kevin Warsh succeeds Jerome Powell as the next Fed chair. This is significant considering how Bitcoin continues to react to the Fed’s outlook, with the flagship crypto crashing to as low as $75,000 following Trump’s nomination of the former Fed governor.

Kevin Warsh’s Rate Outlook And Impact On Bitcoin

Markets are potentially ignoring Kevin Warsh’s rate outlook, according to an X post by analyst Alex Kruger. The analyst stated that although the former Fed Governor prefers a smaller Fed balance sheet, he is also likely to say as much about rate cuts.

U.S. President Donald Trump echoed a similar sentiment last week, saying that Warsh wants to lower rates and will do so without pressure from the White House. Meanwhile, Kruger further noted that Warsh’s first interview since his nomination could signal a bounce in the downturn that began late last Thursday. Kruger also said that markets are recovering and that both Bitcoin and Ethereum present entry opportunities. 

However, in an X post, another analyst, Tae Kim, noted that Warsh is committed to shrinking the Federal Reserve’s balance sheet. The Federal Reserve’s balance sheet exceeds $6 trillion. Warsh supports a move from quantitative easing to quantitative tightening. This move is expected to reduce market liquidity, including for Bitcoin.

Kevin Warsh has argued that quantitative easing has contributed to inflation and inequality in America. He noted that inflation acted as a regressive tax on American workers whose income comes from their wages. Warsh further noted that the Federal Reserve’s balance sheet is much larger than it should be. He argued that it should be shrunk to an easily manageable size.

Bullish Rate Signals Face Liquidity Tightening Risks

Commentators indicate that Warsh is rate-flexible and could be bullish for Bitcoin if there are easing cues. Some of the reduction in-balance-sheet obsessives are also warning that tighter liquidity could cap gains or maintain pressure on risk assets.

In an X post, analyst Sherlock highlighted that the recent Bitcoin price movement has been described as a backdrop or a non-event. Within 72 hours of the Warsh nomination, the asset lost roughly 15%. This fall has been labeled a dollar-led asset liquidity event. Like Bitcoin, both gold and silver have also declined during the same period.

Analyst Sherlock mapped out Bitcoin’s potential paths depending on policy. He said that if the Fed keeps rates elevated and the strong-dollar narrative persists, Bitcoin may remain range-bound. Analyst added that the range could be between $50,000 and $75,000. That said, if they are forced into a pivot and must acquiesce to rate cuts, the dollar will likely weaken, and Bitcoin will get a bid.