Here’s why Fed contender Kevin Warsh is seen as bearish for bitcoin

On Thursday, President Donald Trump said he will announce his pick for the U.S. Federal Reserve chair to replace incumbent Jerome Powell after the latter’s term ends in May.

While nothing is confirmed yet, reports suggest the Trump administration is preparing to nominate Kevin Warsh, who served on the Federal Reserve Board of Governors from 2006 to 2011.

Warsh has occasionally praised cryptocurrencies. Yet bitcoin BTC$82,578.90 plunged late Thursday to near $81,000 lows as his odds spiked on betting sites, with some analysts now pegging him as a bearish force for the asset.

“Markets generally view a resurgence of Warsh’s influence as bearish for Bitcoin, as his emphasis on monetary discipline, higher real rates, and reduced liquidity frames crypto not as a hedge against debasement but as a speculative excess that fades when easy money is withdrawn,” Markus Thielen, founder of 10x Research, told CoinDesk.

Higher real interest rates mean the actual cost of borrowing money after accounting for inflation is elevated. Think of it as the “true” interest rate that hits your finances harder. When real rates are elevated, businesses and investors typically scale back exposure to risky investments such as bitcoin.

Warsh’s track record is adding fuel to the fire. During the global financial crisis (GFC) that lasted from December 2007 to June 2009, Warsh repeatedly cited inflation risks even as the global economy teetered on the brink of a full-blown deflation.

For instance, in September 2008, the month when Lehman Brothers collapsed, Warsh said, “I’m still not ready to relinquish my concerns on the inflation front.”

Seven months later, when the Fed’s preferred inflation measure was at 0.8% and the jobless rate at 9%, he said, “I continue to be more worried about upside risks to inflation than downside risks.”

Over the years, many observers have argued that Warsh’s hawkishness and failure to acknowledge deflation risks exacerbated the crisis.

“From this perspective, his approach would likely have resulted in higher unemployment, slower recoveries, and greater deflation risk during the 2010s,” Thielen said.

All this makes a potential Warsh pick as ironic, as the former Fed governor’s hawkish record clashes sharply with Trump’s reflationary, pro-risk asset playbook. Trump has repeatedly bashed Powell, often resorting to personal attacks for keeping rates elevated and killing the economy. The President has stressed the need for rapid rate cuts, calling for interest rates to be as low as 1% from the present window of 3.5%-3.7%.

Hence, several observers say Warsh is a wrong pick for the Fed that’s expected to toe Trump’s line.

“Kevin Warsh has been a monetary policy hawk his entire career and most importantly, during a time when the labor markets fell out of bed. His dovishness today stems from convenience. The President risks getting duped,” Renaissance Macro Research said on X.

“I read the fomc transcripts during the GFC. His quotes scared me,” Bloomberg’s Chief U.S. Economist Ana Wong said.

Thankfully, even as Fed chair, Warsh cannot dictate rates alone, as the Board of Governors votes collectively, diluting any single voice. It remains to be seen if Trump goes ahead with Warsh.

Until then, his hawkish history may keep spooking risk assets, bolstering the dollar in the interim.