Politics and crypto have been moving more in sync lately. For example, US President Donald Trump’s victory in 2024, after openly endorsing crypto, highlighted how much these two worlds can influence each other.
Given this context, it’s no wonder that FUD got into Bitcoin around the appointment of Kevin Warsh as the next Fed chairman. [BTC]. Especially as investors try to assess the long-term consequences of this decision.
However, with Bitcoin down 14% in the past week since the nomination, it is clear that the market is not pricing in a bull run yet. More importantly, US assets across the board are also falling in tandem.
Source: Bloomberg
Why does this matter? Well, it shows that BTC’s decline is not caused by crypto-specific factors. Instead, investors had been betting on reflation has become cautiousconcerned 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 is optimistic about interest rate cuts, but wants the Fed to shrink its balance sheet. As a result, investors are weighing the long-term impact, which begs the question: Does BTC’s pullback signal something bigger?
Fed Pick Raises Rate Bets, Bitcoin Remains Sideways
Undoubtedly, President Trump has given a big boost to his interest rate cut story.
For context, the main reason he picked Kevin Warsh as the next Fed chairman is because he has someone who is more optimistic about rate cuts. Unlike current Fed Chairman Jerome Powell, whose policy stance has often conflicted with Trump’s vision.
And yet Bitcoin is not recovering. In fact, even during the 2025 cycle, when the The Fed cut rates three timesBTC still ended the year down 6.3%. In short, the impact of Kevin Warsh’s nomination still cannot be fully priced in.
Source: TradingView (BTC/USDT)
At the same time, the liquidity crisis narrative is already weighing on investor sentiment, with bearish pressure on Bitcoin starting to emerge. If Kevin Warsh takes on the role, it could have major implications for the markets.
Moreover, inflation has been persistent, recent macro data have come in higher than expected, and President Trump’s back-and-forth on tariffs is keeping uncertainty high. Even interest rate cuts cannot be fully priced in.
Therefore, Bitcoin’s impact on BTC remains unclear, even though the market has priced in Trump’s selection of Kevin Warsh as Fed chairman. So, judging by the current situation, the market could be more bearish than bullish.
Final thoughts
- The appointment of Kevin Warsh as Fed chairman has reinforced expectations of rate cuts, yet Bitcoin is still down 14.3% over the past week.
- Investors are weighing Warsh’s plan to shrink the Fed’s balance sheet, persistent inflation and Trump’s back-and-forth on tariffs.