#MacroWatchFedChairPick

With holiday trading underway, markets are increasingly fixated on who President Trump will nominate as the next Federal Reserve Chair a decision that could reshape monetary policy expectations for 2025 and beyond. President Trump has said he will announce his pick early in 2026, ahead of Jerome Powell’s term ending in May 2026, raising the stakes for markets that are trying to price in the future path of interest rates.

The frontrunner emerging from both prediction markets and media reports is Kevin Hassett, the current Director of the National Economic Council and a top Trump economic adviser. Hassett’s candidacy has already rattled markets because of his reputation for favoring lower interest rates and a more pro-growth approach compared with the more cautious stance of the current Fed leadership.

If the next Fed Chair is dovish as many expect Hassett would be markets might begin to reprice expectations for 2025 rate cuts aggressively. Under a more dovish Fed, the belief would be that rate cuts could come earlier and be larger, driven by a desire to stimulate borrowing, spending, and investment. Such a shift typically pushes risk assets higher because easier monetary conditions tend to increase liquidity, lower the cost of capital, and reduce discount rates on future earnings. For equities, this could support sustained gains or sector rotation into growthier areas like technology and AI. For Bitcoin, a dovish environment is often interpreted as bullish: lower rates weaken the dollar, increase liquidity, and encourage capital flows into risk-on assets conditions under which BTC has historically performed well. In fact, Bitcoin has already seen some upside on speculation around Hassett’s candidacy, which markets associate with a softer monetary stance.

However, the reality may not be as straightforward as a purely dovish pivot. Even if Hassett is appointed, markets don’t necessarily expect a dramatic loosening. Current pricing in futures markets suggests only modest easing — potentially around three quarters of a percentage point in cuts through 2025 and into 2026 rather than the deep cuts some investors have dreamed of. This reflects lingering skepticism about inflation lingering above target and the autonomy of the Fed’s rate-setting committee (the FOMC) to resist political pressure.

A more hawkish or balanced Chair, by contrast, would likely dampen rate-cut expectations. If someone like former Fed Governor Kevin Warsh or another policy-focused candidate were nominated, markets might price in fewer or later rate cuts, keeping borrowing costs relatively higher. In that scenario, the dollar could strengthen, equity valuations could struggle to break out further, and capital might rotate into safer assets like fixed income or even gold and other hedges. For Bitcoin, this would likely be a headwind: tighter monetary conditions reduce leverage, constrain liquidity, and typically correlate with risk-off sentiment conditions under which cryptocurrencies have historically underperformed or decoupled negatively from equities.

The transmission mechanism from Fed policy to BTC isn’t just theoretical. Crypto markets are sensitive to liquidity and risk appetite, which are heavily influenced by interest rate expectations, credit conditions, and FX strength. Lower rates tend to support risk assets via a weaker dollar and higher real liquidity, while higher or sticky rates tend to increase the opportunity cost of holding volatile assets. Bitcoin’s behavior during past easing cycles confirms this relationship: it often rallies alongside equities and other risk assets when monetary policy is accommodative, but can lag or lag sharply when liquidity tightens.

Taking this all together, the narrative right now is one of two possible regimes:
Dovish leadership (e.g., Hassett) and earlier/larger rate cuts this scenario would likely boost liquidity, raise risk‐asset valuations, weaken the dollar, and be broadly supportive of Bitcoin’s rebound toward or beyond prior highs.
Moderate or hawkish leadership with fewer/limited cuts this would cap monetary easing, keep liquidity tighter than bulls expect, perhaps strengthen the dollar, and introduce more headwinds for risk assets, including BTC.

Neither scenario is certain, but the market’s reaction to this nomination process both in equities and crypto already suggests that traders are placing a premium on the dovish tilt while remaining cautious about just how much easing will actually materialize. This duality means Bitcoin’s trajectory in 2025 and 2026 could be highly dependent on the degree of monetary policy shift once the new Fed Chair is in place.
In summary, if rate cuts are repriced significantly lower and earlier, we could see a stronger macro tailwind for Bitcoin as liquidity expands and risk appetite increases. But if markets temper those rate cut expectations or if the Fed remains more balanced or cautious crypto could experience constraint or sideways behavior even if equities remain somewhat buoyant. The nomination and ensuing policy stance will be one of the most important macro catalysts for BTC in the year ahead.