What Happens to Bitcoin If Warsh Becomes Fed Chair

▲ Kevin Warsh, nominee for Federal Reserve Chair ©

With Bitcoin having fallen nearly 50% from its October peak, the monetary philosophy of Kevin Warsh, a leading candidate for the next Federal Reserve chair, is emerging as another variable. The market has priced him in as a “hawk,” and the impact is already visible on the charts.

According to DL News on Feb. 22 (local time), after former President Donald Trump nominated Kevin Warsh as the next Fed chair, the market interpreted him as a hawkish figure likely to keep interest rates elevated to curb inflation. Although Warsh previously spoke positively about Bitcoin and mentioned rate cuts, the possibility of a reduction in the Fed’s balance sheet is fueling investor concerns.

Since the financial crisis, the Fed has supplied liquidity to markets through quantitative easing, purchasing trillions of dollars in U.S. Treasuries. Bitcoin has historically benefited during such liquidity expansion cycles. However, analysts warn that if Warsh aggressively shrinks the balance sheet, bank reserves could decline and volatility across risk assets could increase. Pepperstone strategist Dilin Wu assessed that there is a “very high” likelihood of greater volatility in the cryptocurrency market if Warsh becomes chair.

Indeed, following Warsh’s nomination, Bitcoin immediately fell 14%. Jimmy Xie, co-founder of Axys, explained that the market prioritized Warsh’s hawkish monetary stance over his pro-crypto remarks. He analyzed that weakening expectations for near-term rate cuts weighed on prices. At the same time, some view Warsh as a pragmatist who is cautious about cutting rates too quickly.

In the long term, however, a different perspective exists. In 2018, Warsh said Bitcoin “could become a sustainable store of value like gold.” Marcin Kazmierczak, co-founder of RedStone, noted that Warsh’s personal openness toward Bitcoin could, over time, strengthen the narrative of the cryptocurrency as a hedge against monetary policy risk.

Bitcoin is currently trading at $67,953, remaining flat over the past 24 hours, while Ethereum (ETH) rose 0.6% to $1,974. However, some point out that in recent months Bitcoin has diverged from the “currency debasement hedge” narrative that once aligned it with gold, instead moving in line with non-AI tech stocks as a risk asset. Warsh’s policy direction and the Fed’s liquidity strategy are expected to be key variables shaping Bitcoin’s future price trajectory.

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