HTX DeepThink: Wosh's nomination sparks a reversal of expectations, and the market re-prices the Federal Reserve's "lower bound" path

Deep Tide TechFlow News, February 2nd, HTX DeepThink column author and HTX Research analyst Chloe (@ChloeTalk1) pointed out that last week the global markets experienced a rare and intense “risk re-pricing”: gold, silver, and Bitcoin all plummeted simultaneously, breaking the previous market consensus of “gold strength, crypto stability.” This was not merely a technical adjustment but a systemic shock triggered by a sudden shift in macro expectations, highly crowded trades clearing out, and a rapid rebound of the US dollar.

The core cause of this volatility lies in the market’s reassessment of the Federal Reserve’s future policy path. The appointment of Kevin Warsh, a former Federal Reserve governor nominated by former President Trump, as the next Fed Chair, significantly eased extreme concerns about “diminished Fed independence, politicized monetary policy, and systemic devaluation of the dollar.” Warsh is neither a pure technocrat nor an aggressive political advocate—having served as a Fed governor from 2006 to 2011, experiencing decision-making during the financial crisis, and being active for years in Wall Street and policy consulting, he possesses high institutional and market credibility. This background has led the market to believe that the Fed’s policy anchoring and independence will remain constrained in the medium term.

As a result, the most crowded macro trades in recent months—“irreversible long-term easing + continued weakening of dollar credit”—have begun to be systematically reduced. Previously, the synchronized rise of gold, silver, and Bitcoin was not solely based on expectations of rate cuts but was pricing in an extreme tail scenario: that in the face of persistent inflation, the Fed would be forced to maintain easing and tolerate higher inflation to meet fiscal and political objectives. Warsh’s appointment significantly lowered the probability of this tail scenario, even if current policies have not yet changed, asset prices need to unwind the risk premiums paid for the “worst-case” outcome.

Meanwhile, the US dollar index rebounded sharply, recording its largest single-day increase since July last year, becoming the direct trigger for the suppression of precious metals and crypto assets. This does not mean the market is betting that Warsh will immediately adopt a hawkish stance but rather that it is reassessing the “lower bound” of the policy path over the next 2–3 years—from “potentially uncontrollable easing” back to a more restrained framework of “fluctuating around neutral interest rates.”

Additionally, the concentration of position structures and leverage risks has amplified volatility. By the end of January, trading in precious metals had become highly “memed,” with trend-following funds, leveraged longs, and quantitative models highly concentrated, causing prices to deviate from fundamentals. Once the macro narrative loosens, chain reactions of profit-taking, stop-losses, and forced liquidations occur, making the historic single-day volatility in silver no coincidence. Although Bitcoin’s fundamentals differ, its capital attributes are highly correlated; the same macro funds that are anti-dollar and anti-fiat currencies are simultaneously allocating to gold, silver, and Bitcoin. When the dollar rebounds, they are forced to reduce their positions across the board, putting pressure on the crypto market.