Trump nominates Kevin Waugh to replace Powell! After the Federal Reserve changes leadership, what variables might there be in the crypto world?

Donald Trump nominates Kevin Warsh to lead the Federal Reserve, drawing attention for his pro-Bitcoin stance. The conflicting signals of balance sheet reduction and rate cuts test market confidence. The Senate confirmation battle continues, and policy directions will influence risk assets.

Dust Settles! “Central Casting” Warsh Emerges to Lead the Federal Reserve

On January 30, 2026, U.S. President Donald Trump officially announced via the social platform Truth Social that he would nominate former Fed Governor Kevin Warsh to succeed Jerome Powell as the next Federal Reserve Chair. Trump praised the 55-year-old financial veteran in his post, calling him “one of the greatest Chairs in Fed history, possibly the best,” and described him as having a “central casting” perfect image that would definitely not disappoint.

Image source: Truth Social Donald Trump officially announces his nomination of Kevin Warsh to succeed Jerome Powell as the next Fed Chair

This 14-month power struggle has finally come to an end. During the nomination process, Warsh successfully defeated several strong contenders, including BlackRock bond chief Rick Rieder, Fed Governor Christopher Waller, and Trump’s economic advisor Kevin Hassett. It is reported that Hassett was once considered a frontrunner and even spent holidays with Trump at the end of 2025, but ultimately lost momentum due to lack of strong Wall Street support and the chain reaction triggered by Powell facing DOJ investigations.

In contrast, Warsh has the backing of major financial figures such as JPMorgan CEO Jamie Dimon and legendary investor Stanley Druckenmiller. These giants conveyed a key message to Trump’s team: Wall Street prefers a leader with a professional background who can maintain an independent market image. Warsh previously served as a Fed Governor from 2006 to 2011 and played a crucial role in stabilizing credit during the 2008 global financial crisis. If confirmed by the Senate, he will officially take over after Powell’s term ends in May 2026.

Bitcoin as the “Police”? Warsh’s Crypto Ties and Policy Vision

For the cryptocurrency industry, Warsh’s nomination is undoubtedly a boost. Unlike Powell, who has long distanced himself from digital assets or even viewed them as speculative tools, Warsh is seen as the first potential Fed Chair with genuine “crypto awareness.” MicroStrategy CEO Michael Saylor even openly stated that Warsh would become the first “Pro-Bitcoin” Fed Chair in history.

Image source: The Wall Street Journal Kevin Warsh

Warsh’s involvement in the crypto industry is not just superficial. He has served as an advisor to crypto index fund manager Bitwise and venture capital firm Electric Capital, and was an early investor in the algorithmic stablecoin project Basis. In multiple interviews, he has described Bitcoin as “the new gold” and a “digital store of value.”

Most notably, his “theory”: he believes Bitcoin is not a threat to the dollar but rather the Fed’s “police.”

In Warsh’s view, Bitcoin exists because the public has lost confidence in monetary policy due to excessive intervention; when central banks’ balance sheets expand excessively, Bitcoin becomes a “market discipline” tool to counteract monetary failure.

However, crypto supporters should also note the “hawkish” elements in Warsh’s stance. While he recognizes blockchain technology’s potential as a software infrastructure, he has criticized many private crypto projects as “disguised currencies” and supports establishing a “wholesale CBDC” focused on dollar competitiveness. He favors a digital dollar system operated by regulated financial institutions, which may conflict with the “permissionless environment” sought by decentralization advocates.

Hawkish-Dovish Dilemma, Warsh Faces Dual Tests of Balance Sheet Reduction and Rate Cuts

The market’s current focus is on how Warsh will implement Trump’s economic agenda. Trump has publicly stated that the next Chair must immediately lower interest rates to ease the $38 trillion national debt’s interest burden and stimulate growth. Reports indicate that Warsh, during a December 2025 meeting with Trump, explicitly supported further rate cuts. This “rate cut promise” was a key factor in his victory, but it also raises concerns about Fed independence.

Nevertheless, Warsh has a long-standing reputation as a “hawk” in monetary policy history. He was among the earliest critics of quantitative easing (QE) within the Fed and advocates for a significant reduction of the current approximately $6.58 trillion balance sheet. This creates a “hawkish-dovish paradox”: Warsh might pursue aggressive balance sheet reduction (quantitative tightening) to justify moderate rate cuts.

For the crypto market, this is a double-edged sword. Rate cuts generally improve liquidity and boost risk assets, but if Warsh insists on shrinking the balance sheet, it could withdraw liquidity from the market, potentially limiting Bitcoin’s long-term upside. Traders are currently watching the interest rate trajectory in the first half of 2026, with a 26% chance of rate cuts at the first FOMC meeting after Warsh’s June appointment.

Senate Confirmation Battle! Shadows of DOJ Investigations and Political Power Struggles

Despite the nomination being set, Warsh’s path to the Fed Chair remains fraught with political obstacles. The confirmation process in the Senate is expected to be highly contentious. Currently, Republican Senator Thom Tillis has stated he will oppose any Fed appointments until the DOJ’s criminal investigation into Powell (involving the $2.5 billion Fed headquarters renovation costs) is transparently resolved. Tillis emphasizes that protecting the Fed from political interference and legal intimidation is “non-negotiable.”

Further Reading
DOJ Criminal Investigation of the Fed! Accuses Powell of Lying About $2.5 Billion Budget, Both Parties React Strongly
DOJ Investigation Sparks Backlash! Global Central Banks Support Powell, Warn Political Interference Could Shake Financial Stability

On the Democratic side, Senator Elizabeth Warren also issued stern criticism, claiming Trump is conducting “political persecution” against Powell, and urging Republicans to defend the Fed’s independence. Warsh will need to demonstrate at hearings that he understands Trump’s growth vision while maintaining sufficient independence to avoid becoming a White House policy proxy.

For investors, this confirmation process’s uncertainty could increase market volatility. Currently, Bitcoin’s price briefly rose to around 83,000 after the nomination was announced, then fell back below the psychological threshold, indicating a period of observation.