When the news broke that Trump nominated Kevin Warsh to head the Federal Reserve, the crypto community went into an uproar—some cheered for the rise of the "pro-crypto faction," while others rushed to liquidate their positions. But the truth is far more complex than the labels suggest.
Warsh is not a traditional "hawk" or "dove." He was a core member of the Federal Reserve during the 2008 financial crisis, but resigned in anger over QE2, believing that central banks should not rely on printing money to create false prosperity. Now, he returns to the center of power, superficially catering to Trump's calls for interest rate cuts, yet his core belief remains unchanged: to defend monetary discipline and be vigilant against excess liquidity.
Surprisingly, his attitude towards Bitcoin is quite open-minded. He has publicly stated more than once that Bitcoin does not threaten the dollar; rather, it can serve as a "watchdog for policy"—when the government abuses currency and fiscal control falters, the market will vote with its feet, turning to non-sovereign stores of value like Bitcoin. He even admitted, "I regret not understanding the revolutionary nature of the Bitcoin white paper earlier."
But this does not mean he will ease monetary policy. Quite the opposite, Warsh advocates for "first reducing the balance sheet, then cutting rates," emphasizing that excess liquidity must be drained before any discussion of lowering interest rates can take place. This means that once inflation rises, he may be more decisive in raising rates than Powell.
So don't be misled by snippets of "support for Bitcoin." What Warsh appreciates is the institutional checks and balances behind Bitcoin, not its speculative nature. In his view, the real benefit is not skyrocketing prices, but the industry's deflation of bubbles, adherence to regulations, and return to the essence of technology.
If he truly takes office in the future, there may be short-term speculation around liquidity expectations, but in the medium to long term, only those projects that can withstand the scrutiny of a "strict principal" will survive.
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