BIT Investment Research: The Federal Reserve appoints a new leader, Bitcoin enters a new tailwind period

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The current market is in a macro re-pricing phase driven by policy expectations. The Federal Reserve leadership may undergo a new round of succession, and if Kevin Warsh succeeds smoothly, he will bring new policy directions regarding interest rate paths, balance sheets, and inflation frameworks. Meanwhile, the debt environment and monetary system that have been expanding for over a decade are also intensifying market reassessment of “currency purchasing power.”

Looking back at Bitcoin’s development path, it was born after the 2008 financial crisis and overlaps significantly with multiple rounds of quantitative easing by the Federal Reserve. From Ben Bernanke’s large-scale balance sheet expansion during his tenure, to market skepticism during Janet Yellen’s period, and then to Jerome Powell’s stress tests under an environment with interest rates above 5%, Bitcoin has continuously reshaped its market positioning through different policy stages. Especially after the approval of spot Bitcoin ETFs in 2024, the “currency devaluation trade” has gradually entered mainstream institutional narratives.

Against this backdrop, potential changes in the Federal Reserve’s policy direction are becoming an important variable influencing Bitcoin narratives.

Currency Cycle Evolution: From Quantitative Easing to Tightening, Bitcoin’s Narrative Reformation

Over the past decade, Federal Reserve policy cycles have provided a continuous macro backdrop for Bitcoin’s evolution. Bernanke’s quantitative easing made the market focus systematically on fiat currency expansion for the first time, laying the foundation for Bitcoin’s narrative as a “fixed supply asset.” During Yellen’s tenure, Bitcoin’s price rose from about $300 to nearly $17,000, gradually entering mainstream view, but it was still widely regarded as a high-volatility speculative asset.

After Powell took office, Bitcoin experienced more complex cycle tests. Early rate hikes and balance sheet reductions caused its price to fall more than 80% from the 2017 high, but during the pandemic, the Fed expanded its balance sheet by nearly $3 trillion in a few weeks, reinforcing market awareness of “monetary expansion.” In 2021–2022, Bitcoin surged to $69,000 but then retraced about 75%, showing it still possesses risk asset characteristics.

However, a key change occurred in 2024: the approval of spot Bitcoin ETFs, which gradually made the “currency devaluation trade” accepted by institutions. Meanwhile, U.S. federal debt has risen to about $39 trillion, and Bitcoin remains in the mainstream market under high interest rate environments, completing a phased shift from marginal asset to macro asset.

Policy Shift and Uncertainty: Under Warsh’s Path, Strengthening and Disrupting Bitcoin Narratives

Under potential new policy frameworks, Warsh’s core propositions include: shrinking the balance sheet, re-emphasizing interest rate tools, and establishing new inflation policy mechanisms. At a hearing on April 21, 2026, he pointed out that the inflation during 2021–2022 was one of the biggest policy mistakes in the past four or five decades, with cumulative price increases of 25%–35% since 2020 still affecting residents’ living costs.

From Bitcoin’s perspective, this judgment to some extent reinforces the “currency devaluation narrative.” If the Fed admits the long-term impacts of past balance sheet expansions, markets will reassess the stability of the monetary system, which supports Bitcoin’s emphasis on fixed supply. At the same time, Warsh explicitly opposes central bank digital currencies (CBDCs), weakening the potential competitive path that was previously seen as a systemic alternative to Bitcoin.

However, the short-term macro environment still faces significant disruptions. On one hand, oil prices have risen above $100, and tightening energy supplies are shifting market expectations from “three rate cuts within the year” to beginning to price in rate hike possibilities; on the other hand, investments in AI infrastructure driving energy demand could push inflation higher before productivity dividends are realized. Internal models even suggest scenarios where CPI rises to 6% cannot be ruled out.

Additionally, if balance sheet reduction proceeds too quickly, in the context of ongoing U.S. debt issuance, long-term interest rates could rise, exerting pressure on risk assets. Conversely, if inflation is systematically underestimated, it could undermine the Federal Reserve’s institutional credibility.

Some of these viewpoints are sourced from BIT on Target. Contact us for the full BIT on Target report.

Disclaimer: Markets carry risks; investments should be cautious. This article does not constitute investment advice. Trading digital assets can involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. BIT is not responsible for any investment decisions based on the information provided herein.