As of May 13, 2026, the U.S. Senate has completed the final confirmation process for the chairman nomination. Kevin Warsh is about to succeed Jerome Powell as the 17th Chair of the Federal Reserve. Powell’s term as chair will officially end on May 15—tomorrow. And the FOMC interest rate decision that was originally scheduled for the same day has been postponed to June 16–17 due to the personnel handover process, to be chaired by Warsh for the first policy meeting after taking office. This means investors may have to wait until mid-next month at the earliest to see the new Fed’s first substantive signal.
But this does not mean the market has a month-long “observation window.” On the contrary, the policy logic shift behind this transfer of power, adjustments to the institutional framework, and the drastic change in the inflation environment are rapidly—faster than expected—remolding the pricing coordinates of crypto assets.
What four key macro policy shocks did the crypto market experience during Powell’s tenure
Looking back at Powell’s chairmanship from 2018 to 2026, four “resonances” between the crypto market and its monetary policy clearly show how macro liquidity defines the rhythm of gains and losses in risk assets.
The first was the zero-rate liquidity “drenching” during the 2020 pandemic shock. The Fed urgently cut rates to zero and launched unlimited quantitative easing, unleashing a surge of global liquidity. Bitcoin surged in a straight line from its March 2020 low to near its all-time high at the end of 2021, around $69,000, driving explosive growth across innovation sectors such as DeFi and NFTs.
The second was the aggressive rate-hiking cycle in 2022. After the Fed signaled rate hikes at the end of 2021, Bitcoin fell from its $69,000 peak and, over four months, dropped to around $30,000. Throughout the hiking cycle, the crypto market remained under pressure, at one point sliding into the $15,000 range, alongside structural liquidations such as the Luna collapse and FTX’s blowup.
The third was the start of the 2024 rate-cutting cycle. After the Fed announced rate cuts in September 2024, Bitcoin began from around $52,000, with risk assets reacting quickly.
The fourth was the 2026 inflation rebound and policy gridlock. At the April 2026 FOMC meeting, there were the most dissenting votes in 34 years—four against. Serious disagreement emerged within the committee about whether to maintain dovish language. In Powell’s last press conference during his tenure, he acknowledged that the decision focus was moving “closer to a more neutral position,” and the market was nearly certain that there would be no rate cuts before the end of this year.
The logic chain connecting these four events is very clear: the turning point in Fed monetary policy is also the turning point for the direction of crypto asset trends. When macro liquidity tightens, the crypto market gets pressured; when it eases, crypto benefits. This correlation has been repeatedly verified over the past six years. Now that Powell is stepping down and Warsh is taking over, the crypto market is standing at the starting point of a new round of monetary policy framework reconstruction.
Why this Fed chair change is more structurally meaningful than previous handovers
There have been nearly 20 modern central-bank leadership transitions since the Great Depression, but the uniqueness of this 2026 handover is that it is not merely a change in the person at the top—it is a paradigm shift at the level of policymaking philosophy.
You can see it even from the confirmation process. Warsh’s Senate nomination vote result was 51 to 45, earning cross-party support from only two Democratic senators, far lower than the cross-party support when Powell was nominated as a governor in 2014—58 votes. Such polarization in political identity reflects that the Fed’s future direction has become highly fractured domestically in the United States. The market is clear that this is no longer a “normal handover” extending Powell’s line.
The deeper structural significance lies in Warsh’s fundamental critique of how the Fed should be positioned. At the nomination hearing, he openly stated that the Fed has “lost its direction” and needs a thorough “institutional transformation.” He criticized tools such as dot plots as being excessively transparent and distracting from market judgment, and advocated returning to a communication style of “intentional ambiguity.” This suggests that the highly transparent communication system the Fed built over the past two decades may face structural adjustments, and the predictability of the policy path available to the market could decline significantly.
And it is precisely this kind of “unpredictability” that poses the most fundamental uncertainty to the crypto market, which relies on macro narratives to drive prices.
What are the fundamental differences between Powell’s and Warsh’s monetary policy logic
The differences go far beyond traditional labels like “hawkish” or “dovish.” They run down to the underlying logic of monetary policy governance. We can break them down across three dimensions.
First, differences in the inflation measurement framework. Powell has long relied primarily on the core PCE price index as the main basis for decisions; Warsh clearly favors a “trimmed mean” inflation measure—an average that excludes extreme price swings—and argues for filtering out short-term noise. Critics point out that the cost of this approach may be that the Fed responds “sluggishly” to turning points in the economy, because major shifts often begin in the tails of the data. If Warsh institutionalizes this measurement method, the Fed’s way of judging inflation could change systematically.
Second, differences in the orientation of core policy tools. Under Powell, monetary policy operated within a “data-dependent” framework, emphasizing gradual adjustments and internal consensus. Warsh, however, advocates a combination strategy of “rate cuts + balance sheet reduction.” On one hand, lowering rates eases economic pressure; on the other hand, by aggressively tightening via quantitative measures to shrink the balance sheet, the source can control money supply. This means that even if interest rates fall, the liquidity environment the market actually experiences may not necessarily be more permissive—because the “water volume” withdrawn through balance sheet reduction may offset the “pressure relief” brought by rate cuts.
Third, differences in communication and expectation management. Powell continued and strengthened the tradition of information transparency from the Bernanke and Yellen eras. Warsh hinted in the hearing that regular press conferences might be canceled and dot plots abolished, saying the Fed currently has a “problem of over-communication.” This shift means the channel through which the market obtains decision signals will narrow, and investors relying on Fed guidance for positioning face increased risk of information asymmetry.
Is Kevin Warsh truly crypto-friendly, or crypto-hardline?
There is significant disagreement in the market—this is also the variable that crypto investors most need to pay attention to.
On the surface, Warsh appears highly accepting of crypto assets. At the hearing, he explicitly said that “cryptocurrencies are already part of the U.S. financial system,” and pledged that he would not push for a central bank digital currency (CBDC) during his term. Previously, he also described Bitcoin as “an important asset” and a “good watchdog for policy implementation,” arguing that Bitcoin’s price can reflect the market’s confidence in how the Fed handles inflation and monetary policy. In addition, his disclosure documents show that he holds equity in a Bitcoin payment startup, Flashnet, and maintains advisory relationships with crypto companies such as Bitwise and Basis.
However, from the standpoint of policy substance, the “crypto-friendly” label for Warsh needs to be carefully distinguished between “attitude-friendly” and “liquidity-friendly.” His positive assessment of crypto assets does not necessarily translate into a monetary policy environment that is favorable to crypto asset prices rising. 10x Research’s founder noted that the market generally views Warsh gaining policy influence as a negative factor for Bitcoin, because he has long emphasized monetary discipline, higher real interest rates, and tighter liquidity. His policy framework is more inclined to treat crypto assets as “speculative products under a loose money environment” rather than tools to hedge inflation.
In late April, during the period when Warsh attended the hearing, Bitcoin briefly fell below $75,000. Although it later rebounded, concerns about liquidity tightening after the new chairman takes office are clearly visible. That is why some analysts think: Warsh may be a Fed chair who intellectually agrees with crypto assets, but compresses them through policy outcomes.
How to infer the monetary policy path after Warsh takes office
The April CPI data delivered a signal with almost no room for ambiguity. April headline CPI rose 3.8% year over year, the largest annual increase since May 2023; core CPI rose to 2.8%, exceeding market expectations across the board. Energy prices jumped 3.8% month over month, contributing more than 40% of the overall increase—directly stemming from the Iran conflict causing disruptions to passage through the Strait of Hormuz, a pure supply shock.
From Warsh’s policy toolkit, the nature of supply and demand means the Fed’s response options are extremely limited. The Fed cannot “print oil,” and rate hikes cannot resolve the supply reductions caused by conflicts among Middle East tribes. Cleveland Fed’s “inflation nowcast” tool is expected to have overall inflation rise further to 3.89% in May, while a University of Michigan survey shows consumers’ inflation expectations for the year ahead surged to 4.8%, the highest in seven months.
Against this macro backdrop, the policy path after Warsh takes office appears as a highly contradictory combination. Trump has clearly expected rate cuts during the nomination process, but Warsh repeatedly emphasized in the hearing that the president did not ask him to make any interest-rate commitments—“Even if he speaks, I won’t agree.” Meanwhile, in the April FOMC meeting, three regional Fed presidents cast dissenting votes against the more dovish language—strong signals sent to Warsh after he takes office: there is no room for rate cuts in the near term.
The market’s repricing has already made the issue clear. Interest rate futures indicate an 80%+ chance that rates will remain flat throughout 2026. The S&P 500’s forward P/E ratio is at an extreme level of 41.83. Crypto assets face a squeeze from both a strengthening U.S. dollar and rising risk-free yields.
How the “institutional transformation” proposed by Warsh will affect crypto assets’ long-term pricing logic
If the first five H2 sections focus on short-term policy paths, this dimension reaches the deepest variable that affects crypto markets’ valuation systems over the coming years.
The “institutional transformation” Warsh proposed at the hearing is not rhetorical—it points to concrete framework adjustments in three directions:
- First, rebuilding the policy framework: shifting from a “crisis-response” orientation to a new paradigm of a “smaller central bank,” deregulation, and monetary policy normalization.
- Second, a systematic reset of fiscal-monetary coordination: Warsh advocates strengthening coordination between the Fed and the Treasury Department and executive departments, but only at non-monetary-policy levels.
- Third, potential adjustments to the inflation-targeting regime: he agrees with Greenspan’s definition of “price stability” as a level of price changes so low that “nobody debates it anymore,” implying the 2% inflation target itself may be re-examined.
These institutional changes could have long-term implications for how crypto assets are priced in two layers:
- On one hand, if Warsh shifts inflation measurement from core PCE to the trimmed mean, the Fed may start taking action only after real inflation pressure continues to build—this “delayed response mechanism” could instead increase the risk of inflation overshooting. From the Bitcoin narrative logic, this would be a scenario that strengthens its “store of value” function: policy response lags in the fiat system could translate into the risk of purchasing power dilution, potentially turning into demand for Bitcoin allocation.
- On the other hand, among the reform directions Warsh advocates, the most directly crypto-beneficial initiative—clearly excluding the CBDC option—has already been locked in. He explicitly stated at the hearing that he would not move forward with a central bank digital currency during his tenure. This preserves space for private-sector crypto innovation and reduces the regulatory risk that the government could directly intervene into users’ wallets through digital fiat tools.
However, the long-term benefits above need to be assessed under the big premise that the overall liquidity environment is tightening. Historically, crypto assets have never truly experienced a Fed cycle that is “recognize Bitcoin but still shrink the balance sheet.” This is the biggest variable in the Warsh era.
FAQ
Q1: What is the most direct impact of a change in Fed chair on the crypto market?
The “rate cuts + balance sheet reduction” combination preferred by the new chair Warsh differs structurally from Powell’s “data-dependent” framework. Higher real interest rates combined with balance sheet reduction—i.e., liquidity being drained—typically suppress demand for non-yielding risk assets like crypto. In the short term, the main risk facing the market is heightened volatility driven by increased uncertainty in policy signals.
Q2: Is Warsh a Fed chair that is “pro-crypto”?
In terms of attitude, Warsh acknowledges that cryptocurrencies are part of the financial system, excludes CBDC, and has previously held equity in crypto-related companies. But in terms of policy substance, he has long emphasized monetary discipline, higher real interest rates, and tightening liquidity, which overall is unfavorable for expansion in risk-asset valuations. Therefore, it’s necessary to distinguish “attitude-friendly” from “policy-outcome-friendly.”
Q3: What is the biggest macro uncertainty facing the current crypto market?
The biggest uncertainty is not the act of rate hikes or rate cuts itself, but a possible change to the Fed’s communication mechanism. Warsh hinted at the hearing that regular press conferences might be canceled and dot plots abolished. If this direction becomes reality, the channels through which the market obtains Fed decision signals will narrow, and the difficulty of macro allocation relying on policy guidance will rise significantly.
