Politics and crypto have been moving more in sync lately. For instance, U.S President Donald Trump’s 2024 win, after openly endorsing crypto, highlighted just how much these two worlds can influence each other.
Given this context, it’s no wonder that the FUD around Kevin Warsh’s nomination as the next Fed Chair has started spilling into Bitcoin [BTC]. Especially as investors try to assess the long-term implications of this decision.
However, with Bitcoin down 14% over the past week since the nomination, it’s clear that the market isn’t pricing in a bull run just yet. More importantly, U.S assets across the board are also moving down together.
Source: Bloomberg
Why does this matter? Well, it shows that BTC’s decline isn’t driven by crypto-specific factors. Instead, investors who had been betting on reflation have turned cautious, worried that Warsh’s policies could tighten liquidity.
For context, reflation is when the economy is stimulated to boost growth after a slow period. This usually means more Fed liquidity and lower interest rates, conditions that have historically helped Bitcoin move higher.
However, Kevin Warsh, while bullish on rate cuts, wants the Fed to shrink its balance sheet. As a result, investors are weighing the long-term impact, raising the question – Is BTC’s pullback signaling something bigger?
Fed pick boosts rate bets, Bitcoin stays sideways
No doubt, President Trump gave a big boost to his rate-cut narrative.
For context, the main reason he picked Kevin Warsh as the next Fed Chair is to have someone more bullish on rate cuts. Unlike current Fed Chair Jerome Powell, whose policy stance often went against Trump’s view.
And yet, Bitcoin isn’t rallying. In fact, even during the 2025 cycle, when the Fed cut rates three times, BTC still ended the year down 6.3%. In short, the impact of Kevin Warsh’s nomination still can’t be fully priced in.
Source: TradingView (BTC/USDT)
At the same time, the liquidity-squeeze story is already weighing on investor sentiment, with bearish pressure on Bitcoin starting to show. If Kevin Warsh steps into the role, it could have major effects on markets.
On top of that, inflation has been stubborn, recent macro releases have come in higher than expected, and President Trump’s back-and-forth on tariffs keeps uncertainty high. Even rate cuts can’t be fully priced in.
Hence, for Bitcoin, even though the market has priced in Trump picking Kevin Warsh as Fed Chair, the impact on BTC remains unclear. Hence, judging by the current setup, the market may be more bearish than bullish.
Final Thoughts
- Kevin Warsh’s nomination as Fed Chair has reinforced expectations of rate cuts, yet Bitcoin is down 14.3% over the past week.
- Investors are factoring in Warsh’s plan to shrink the Fed’s balance sheet, stubborn inflation, and Trump’s back-and-forth on tariffs.