Kevin Warsh's Fed System, a Signal of 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, is concluding his 8-year term, leaving behind rekindled inflation and a high-interest rate stance, and will hand over the baton to the incoming Chairman, Kevin Warsh.

According to cryptocurrency specialized media 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 is frozen at 3.50-3.75%. However, with the Consumer Price Index (CPI) rebounding to 3.3% in March, he is retiring without fully ending the fight against inflation. Warsh, nominated by U.S. President Donald Trump, begins his term burdened by upward pressure on oil prices and a $6.7 trillion balance sheet.

Powell's 8 years were a continuous series of crisis responses and liquidity provision. In March 2020, during the pandemic, he lowered the benchmark interest rate to near zero and supplied nearly $9 trillion in liquidity, supporting financial markets. During this process, Bitcoin (BTC) formed a bull market, rising from $5,000 to $69,000. Powell assessed 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 that inflation in 2021 was a temporary phenomenon remained a decisive misjudgment. The subsequent delayed response led to intense tightening with 11 interest rate hikes over 16 months. During this process, a series of bankruptcies of regional banks, including Silicon Valley Bank, occurred, making financial system instability a reality. Warsh criticized this as a “fatal policy error” and emphasized the need for the Fed's fundamental improvement.

The incoming Chairman, Warsh, has shown a more open stance toward the virtual asset market. He is known as an investor holding virtual assets worth over $100 million and has assessed 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 are also concerns about a short-term contraction in market liquidity due to the high likelihood of accelerating quantitative tightening (QT) to stabilize prices.

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

The change in the Fed's leadership is expected to be a turning point that will alter the flow of global financial markets. As Warsh's monetary policy changes are added to the institutional foundation built by Powell, the possibility of a new market order being formed is increasing.

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