Kevin Warsh's Fed System, Signalling a Major Shift in Monetary Power..."Bitcoin Instead of Dollar"

▲ Bitcoin (BTC), Dollar (USD)/AI Generated Image

Jerome Powell, Chairman of the U.S. Federal Reserve, concludes his 8-year term, leaving behind rekindled inflation and a high-interest rate stance, and hands over the baton to incoming Chairman Kevin Warsh.

According to crypto media outlet BeInCrypto on April 26 (local time), Chairman Powell will preside over his final Federal Open Market Committee (FOMC) press conference on April 29. The current benchmark interest rate remains frozen at 3.50-3.75%. However, with the March Consumer Price Index (CPI) rebounding to 3.3%, he will retire without fully winning the fight against inflation. Warsh, nominated by U.S. President Donald Trump, begins his term burdened by rising oil prices and a $6.7 trillion balance sheet.

Powell's 8 years were a continuous series of crisis response and liquidity provision. In March 2020, during the pandemic, he lowered benchmark interest rates to near zero and injected nearly $9 trillion in liquidity, supporting financial markets. During this period, Bitcoin (BTC) formed a bull market, rising from $5,000 to $69,000. Powell described Bitcoin as a “virtual asset but similar in nature to gold,” creating an opportunity to spread its recognition as an institutional asset.

However, his judgment in 2021 that inflation was a temporary phenomenon proved to be a critical misjudgment. The subsequent delayed response led to intense tightening with 11 interest rate hikes over 16 months. During this process, a series of regional bank failures, including Silicon Valley Bank, occurred, materializing financial system instability. Warsh criticized this as a “fatal policy error,” emphasizing the need for the Fed to overhaul its structure.

The incoming Chairman Warsh has shown a more open stance towards the virtual asset market. He is known as an investor holding over $100 million in virtual assets and has evaluated Bitcoin as a sustainable store of value. At the same time, he has maintained an opposing stance on the introduction of central bank digital currencies (CBDCs). However, there is also concern about a short-term contraction in market liquidity due to the high likelihood of accelerating quantitative tightening (QT) for price stability.

The market is looking for clues on the timing of interest rate cuts in Powell's final FOMC remarks. If Warsh officially takes office on May 15, the monetary policy stance is likely to change rapidly. There is an observation that if a more hawkish monetary policy is implemented, Bitcoin's role as a non-governmental asset could become even more prominent.

The change in leadership at the Fed is expected to be an inflection point that alters the flow of global financial markets. With Warsh's monetary policy changes added to the institutional foundation established by Powell, the likelihood of a new market order forming is increasing.

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