Recently, hasn’t a lot of people been like me, just a couple of days ago I was wondering: how long is this guy Powell going to keep messing with us?
Recently, I've come across a big piece of news: Trump is going to nominate Kevin Warsh as the next Federal Reserve Chairman! As soon as I saw it, I knew this was not just a simple change of personnel; the entire market's rules of the game might change! Many people are just focusing on his 'support for Bitcoin' label, and they have started shouting that BTC will surge to 200,000 dollars. However, the market immediately threw a bucket of cold water on that: if you only see this bit of 'good news', in the upcoming policy adjustments, you're likely to be cut like leeks!
First, let's clarify how Powell and Warsh are different. In simple terms: Powell is a 'cautious old man', making decisions like driving while only looking in the rearview mirror; he only dares to act when data clearly indicates that inflation has dropped—he delayed raising interest rates, and now that it's time to cut rates, he is still dragging his feet. As a result, policy is always half a beat slow, and the market follows suit with its fluctuations; friends in the crypto space should feel this the most, with prices going up and down, which can be quite stressful!
Looking at Warsh again, this person is quite a 'tough character', with a strong reformist spirit and a sharp eye. He doesn't just look at past data but plans ahead. His most famous saying is: 'Inflation is actually something that is chosen'—meaning the central bank must be willing to take decisive action! Moreover, the biggest difference between him and Powell is that: Powell is still relying on printing money (QE) to support superficial prosperity, while Warsh believes that 'the central bank's balance sheet is too bloated' and must be slimmed down (balance sheet reduction) before there is room for interest rate cuts. He understands how Wall Street works (having previously worked at Morgan Stanley) and is aware of the difficulties faced by ordinary people, preferring to tighten the financial markets in the short term to allow the real economy to gradually improve.
Let's take a bold guess: if Warsh really takes office in May 2026, the next steps might look like this:
The first wave will definitely be a 'pain period', probably from May to August 2026. He may raise the monthly balance sheet reduction from $95 billion to $150 billion—simply put, the money in the market will suddenly decrease! By then, the U.S. stock market and the crypto space are likely to experience a sharp correction, and the deleveraging process will certainly be painful. Long-term bonds will also fall, causing yields to spike. At that time, many retail investors will be confused: why is it still falling with a new person in charge? Some may even curse him, but this is like being anesthetized before surgery; pain is inevitable, and only by enduring it can there be a chance for recovery!
After enduring until September 2026, by 2027, we should enter the 'recovery phase'. The balance sheet will have slimmed down, and Warsh will begin to boldly cut interest rates. He firmly believes that AI and technology can improve productivity, which can help suppress inflation, so he will use low interest rates in conjunction with this wave of technological dividends. By then, things will be different: Bitcoin and tech stocks, these risk assets, will experience a real surge! After all, with lower funding costs and tangible growth brought by AI, mortgage rates will also drop, allowing the U.S. real estate market to recover, and people will feel more confident spending money, making life much easier.
When it comes to Bitcoin, Warsh once said something that drove the crypto community crazy: 'For those under 40, Bitcoin is your new gold!' This is not just a casual remark but redefines Bitcoin's attributes. In the past, during Powell's era, Bitcoin was like a 'tailgater', rising when the Nasdaq rose and falling when the Nasdaq fell, treated as a high-risk tech stock. But under Warsh, Bitcoin may become a 'hard currency' that hedges against fiat currency risk. If he really implements 'balance sheet reduction before interest rate cuts', the dollar may weaken, and people's trust in paper currency will be reconsidered. By then, Bitcoin will no longer be a little brother following the U.S. stock market but an ark that can save lives when capital floods!
So what should ordinary retail investors do? Remember these three points and avoid pitfalls!
First, don't die before dawn! The 'pain' of balance sheet reduction in mid-2026 may be the last good opportunity for bottom-fishing. Keep some USDT on hand and don't go all in; otherwise, you won't have time to cry when it drops.
Second, keep a close eye on the combination of AI and Crypto! Warsh particularly believes that AI can drive productivity; those Web3 projects that can implement AI and truly improve efficiency, such as DePIN and computing power leasing, will surely reap the biggest policy dividends. Don't just focus on Bitcoin; these sectors are also worth watching.
Third, there needs to be a sense of long-termism! If you truly believe Bitcoin is the new gold, then don't get caught up in its current fluctuations. Warsh's ascent to power essentially endorses Bitcoin's status as a 'reserve asset', which is a long-term positive.
Overall, this is a reform that involves initial hardship followed by sweetness; only those who survive the painful period will be able to enjoy the great feast after interest rates are cut! Don't just focus on the current fluctuations and panic; keep your sights long-term and follow the general direction of policy to avoid being harvested by the market~