Trump appoints Kevin Warsh to the Fed: a turning point for Bitcoin

The succession to the leadership of the U.S. Federal Reserve is becoming one of the major issues for the new Trump administration. According to Polymarket predictions, Kevin Warsh emerges as the favorite candidate to become the Fed Chair. This potential appointment is causing mixed reactions in financial markets, particularly due to its implications for monetary policy and digital assets.

Who is Kevin Warsh and why his appointment divides opinion

Kevin Warsh is not an unfamiliar figure in American finance. A former Federal Reserve governor, he embodies a monetary philosophy that differs significantly from the approach of recent years. While the Fed has become accustomed to intervening heavily at the first signs of economic stress, Warsh advocates for a more restrictive approach based on market discipline.

Since 2008, the U.S. central bank has gradually shifted toward a model where it functions more as a systemic valuation insurer than as a true central bank. Liquidity injections, successive quantitative easings, and the famous “Fed put” (the implicit guarantee that the Fed will intervene to save markets during downturns) have created a structural dependence on monetary stimulus. Warsh’s arrival would symbolize a change: a return to the Fed’s strict mandate, less preventive intervention, and acceptance that markets will experience corrections.

Monetary policy tightening: immediate consequences

A less accommodative Fed generates mixed reactions in the markets. In the short term, marginal liquidity reduction and increased monetary discipline are not favorable scenarios for so-called “risky” assets. Bitcoin, despite its status as digital gold, is not immune to this logic. Monetary contraction tends to reduce speculative capital inflows and increase the cost of capital for investors.

However, Warsh’s appointment also results from a desire to restore the Fed’s institutional credibility after fifteen years of gradual drift. Markets dislike uncertainty, and this apparent rigor could paradoxically stabilize long-term inflation expectations, a key parameter for the entire economy.

Bitcoin benefits from the discredit of the traditional monetary system

The paradox becomes interesting when considering long-term dynamics. If Warsh succeeds in imposing genuine monetary discipline and limits deficit monetization, Bitcoin may suffer during the adjustment phase… but gain structural legitimacy. The asset then becomes the true hedge against a monetary system that has proven its limits.

Conversely, if Warsh’s experiment fails and “budget dominance” prevails (meaning fiscal policy overrides monetary discipline), Bitcoin immediately benefits from the growing discredit of fiat currency. In this scenario, investors turn to non-sovereign, scarce, and politically neutral assets like Bitcoin.

In other words: Bitcoin does not necessarily thrive because the Fed is strong. Bitcoin gains when the traditional monetary system reveals its flaws. The next four years will be crucial in determining which of these two scenarios will prevail.