President Trump nominated Kevin Warsh Friday to replace Jerome Powell as Federal Reserve Chair when Powell's term expires in May.
Bitcoin (BTC) dropped to $81,000 Thursday evening as Warsh's selection odds surged on prediction markets, with over $1.68 billion in leveraged crypto positions liquidated within 24 hours.
Warsh, 55, served as a Fed governor from 2006 to 2011 during the financial crisis. His hawkish track record contradicts Trump's repeated demands for aggressive rate cuts and looser monetary policy.
The nomination creates tension between Trump's pro-crypto campaign promises and Warsh's documented skepticism toward digital assets. Warsh dismissed private cryptocurrencies as "software that pretends to be money" in a 2022 Wall Street Journal op-ed.
What Happened
Bitcoin fell from the high $80,000s to $82,601 Friday morning following the nomination announcement. The asset has now lost approximately one-third of its value since October's all-time high near $126,000.
Long positions accounted for $1.56 billion of total liquidations, representing 93% of forced exits across major exchanges according to CoinGlass data. Roughly 267,370 traders were forced out of positions as cascading margin calls accelerated the selloff.
Warsh's record during the 2008 financial crisis amplified market concerns about tightening monetary conditions. In September 2008, as Lehman Brothers collapsed, Warsh stated he remained unwilling to "relinquish my concerns on the inflation front" despite the economy sliding toward deflation.
Seven months later, with the Fed's preferred inflation measure at 0.8% and unemployment at 9%, Warsh maintained he was "more worried about upside risks to inflation than downside risks." Bloomberg Chief U.S. Economist Ana Wong stated Warsh's FOMC transcripts from that period "scared me."
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Why It Matters
The nomination exposes fundamental contradictions in Trump's economic approach. Trump has consistently attacked Powell for maintaining elevated rates and demanded cuts of two to three percentage points. Warsh's historical advocacy for monetary discipline and smaller Fed balance sheets directly conflicts with those demands.
Warsh called for "regime change" at the Fed in a July 2025 CNBC interview, arguing the institution faces a "credibility deficit." However, his recent shift toward supporting rate cuts emerged only as he became a leading contender for the position.
Markus Thielen of 10x Research told CoinDesk that markets view Warsh's potential influence as bearish for Bitcoin because "his emphasis on monetary discipline, higher real rates, and reduced liquidity frames crypto not as a hedge against debasement but as a speculative excess."
The Fed chair operates within constraints. Interest rate decisions require majority votes from the 12-member Federal Open Market Committee, diluting any single member's influence. Powell could remain on the Fed board through early 2028 despite losing the chairmanship, creating potential resistance to dramatic policy shifts.
Republican Senator Thom Tillis has vowed to block all Fed nominees until the Justice Department resolves its investigation into Powell over testimony regarding the Fed's headquarters renovation. This threatens to complicate Warsh's confirmation timeline despite Republican Senate control.
Warsh invested in stablecoin project Basis in 2018 and asset manager Bitwise in 2021, where he remains an advisor. However, his 2022 advocacy for a U.S. central bank digital currency to counter China's digital yuan drew criticism from Bitcoin proponents who view CBDCs as antithetical to cryptocurrency's decentralization principles.
Technical analysts point to Bitcoin breaking below its bear flag pattern, with some forecasting further declines toward $70,000 if current selling pressure continues through February. The asset's RSI approached oversold territory near 30, suggesting potential for short-term rebounds.
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