The Difficult Situation Facing Bitcoin: What Does Warsh's Leadership of the Federal Reserve Mean

According to data from the prediction market Polymarket, Kevin Warsh is a leading candidate to become the next Federal Reserve Chair. But this news is not welcomed by the markets, especially for risk assets like Bitcoin. This is no coincidence—Warsh represents a new direction in Fed policy that will profoundly change the liquidity-rich market ecosystem.

From Rescue Mechanisms to Discipline Enforcement

Over the past fifteen years, the role of the Federal Reserve has fundamentally changed. Since the 2008 financial crisis, the Fed is no longer just a central bank; it has become an asset insurer. Whenever market stress occurs, the Fed supplies unlimited liquidity; volatility is managed by the Fed; markets are kept in a state of artificial infusion. This is the famous “Fed put”—markets know they will be rescued no matter what.

Warsh belongs to the camp opposing this model. He believes that a market that no longer self-corrects is no longer a true market. If he takes over the Fed, the game rules will change dramatically: automatic interventions will decrease, preemptive rescues will stop, and the central bank will strictly return to its statutory duties.

Bitcoin’s Dilemma

This news is complex for Bitcoin, precisely illustrating why Bitcoin’s situation has become difficult.

In the short term, the problem is clear. What does a less accommodative Fed mean? Reduced liquidity, increased monetary discipline, and risk assets falling out of favor. Bitcoin itself relies on market risk appetite; in this environment, short-term pain is almost inevitable.

But in the medium to long term, the story reverses. If Warsh succeeds in enforcing monetary discipline while the government continues to fill economic gaps through fiscal spending (the so-called “fiscal dominance”), then a weakened credit system will strengthen Bitcoin’s value as a non-sovereign, scarce, politically neutral asset. People will ask: the central bank can no longer freely print money—who will guarantee my currency? The answer is decentralized, government-independent Bitcoin.

An Ironic Paradox

The logic here is harsh: Bitcoin doesn’t win because the system is strong, but because it exposes the system’s limits. If Warsh fails, fiscal dominance will eventually erode the currency, benefiting Bitcoin through credit devaluation. If Warsh succeeds, Bitcoin may face short-term pressure but gain structural legitimacy.

In any case, the next four years will not be linear. Bitcoin is at the center of the institutional game, and this difficult situation may well be the watershed for its long-term victory or defeat.