Why Bitcoin Investors Fear Trump’s Fed Chair Pick Kevin Warsh

TLDR

• President Donald Trump is expected to nominate Kevin Warsh as the next Federal Reserve chair on Friday, replacing Jerome Powell whose term ends in May.
• Warsh, who served as Fed governor from 2006-2011, is viewed as a hawkish choice who favors fiscal restraint, lower inflation, and tighter monetary policy.
• Bitcoin dropped to nearly $81,000 as Warsh’s odds surged to 95% on prediction markets, with analysts viewing him as bearish for crypto despite his past praise of Bitcoin.
• Warsh’s track record during the 2008 financial crisis showed consistent warnings about inflation risks even as the economy faced deflation threats.
• The nomination appears contradictory to Trump’s preference for lower interest rates and pro-growth policies, as Warsh historically supported higher rates and monetary discipline.

President Donald Trump will announce his pick for Federal Reserve chair on Friday morning. Multiple reports indicate Kevin Warsh will be the nominee.

Warsh served as a Fed governor from 2006 to 2011. Trump met with him on Thursday, according to Reuters.

The announcement will reveal who will replace current Fed chair Jerome Powell. Powell’s term ends in May 2026.

Market Reaction and Betting Odds

Prediction markets reacted swiftly to the news. Warsh’s odds on Polymarket jumped from 30% to 95% overnight.

BlackRock executive Rick Rieder, previously the frontrunner, saw his odds fall to 3.4%. Kalshi shows similar numbers with Warsh at 93%.

Bitcoin fell to nearly $81,000 late Thursday as Warsh emerged as the likely pick. The US dollar strengthened and Treasury yields rose in response.

Warsh’s Views on Bitcoin and Monetary Policy

Warsh holds more favorable views on Bitcoin than Powell. In a July interview with the Hoover Institution, he called Bitcoin an important asset.

Powell has largely dismissed cryptocurrency’s role in the US economy. This marks a clear difference between the two officials.

Despite his positive comments about Bitcoin, markets view Warsh as bearish for crypto. His emphasis on monetary discipline suggests tighter financial conditions ahead.

Markus Thielen, founder of 10x Research, explained the concern. “His emphasis on monetary discipline, higher real rates, and reduced liquidity frames crypto not as a hedge against debasement but as a speculative excess,” Thielen told CoinDesk.

Controversial Financial Crisis Record

Warsh’s time during the 2008 financial crisis draws scrutiny. He repeatedly warned about inflation risks while the economy faced deflation.

In September 2008, when Lehman Brothers collapsed, Warsh said he wasn’t ready to drop inflation concerns. Seven months later, with unemployment at 9% and inflation at 0.8%, he still worried about upside inflation risks.

Critics argue this hawkishness made the crisis worse. Many observers say his failure to acknowledge deflation risks prolonged economic pain.

Thielen suggests Warsh’s approach would have caused higher unemployment and slower recoveries. This history makes investors nervous about his potential leadership.

Conflict with Trump’s Economic Goals

The potential nomination creates an apparent contradiction. Trump has repeatedly criticized Powell for keeping interest rates too high.

The president wants rates as low as 1%. Current rates sit between 3.5% and 3.7%.

Warsh’s career shows consistent support for higher rates and fiscal restraint. Renaissance Macro Research called him a monetary policy hawk on X.

The Fed chair cannot set rates alone. The Board of Governors votes collectively on monetary policy decisions.

Trump made his announcement plans clear on Thursday. The formal nomination will come Friday morning.

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