The next Fed chief and the paradox for Bitcoin

The financial world is facing a crucial decision. After sixteen years of cheap money and constant Fed interventions, a new direction seems to be emerging. On Polymarket, markets are clearly indicating preferences for the next leader of the U.S. Federal Reserve, and this says a lot about what is expected to change.

From Cheap Money to Monetary Discipline

Since 2008, the role of the Federal Reserve has radically transformed. It is no longer just a monetary regulatory institution – it has essentially become an asset insurer. At the first sign of stress in the markets, the Fed intervened immediately. Unlimited liquidity, controlled volatility, markets in constant infusion. This phenomenon, also known as the Fed put, has reshaped how investors assess risk.

The financial system of recent years has adapted to a reality where the market does not self-correct – it operates under the protection of a public entity. This dynamic has led to inflated prices, risk distortions, and a market that has forgotten what an organic correction looks like.

Kevin Warsh: What a Paradigm Shift Means for Markets

The next Fed chair seems to be a choice that represents the exact opposite. Kevin Warsh belongs to that category of officials who believe that a market that does not correct itself is no longer a true market. Under his leadership, less automatic intervention is expected and a return to the Fed’s strict mandate: monetary stability and inflation control.

For risk asset markets – stocks, cryptocurrencies, anything thriving under abundant liquidity conditions – the change could be detrimental in the short term. Less marginal liquidity and more rigorous monetary control mean that the scenario of automatic growth ends.

Bitcoin Between Two Scenarios: Short-Term vs. Long-Term Perspective

In the immediate term, Bitcoin and volatile assets could suffer. When the Fed becomes more restrictive, capital withdraws from margins, and volatility re-enters the market. This is not an easy situation for BTC either.

But the picture changes when we look further ahead. If Warsh succeeds in imposing true monetary discipline and reducing fiscal support through monetization, this does not harm Bitcoin – it legitimizes it structurally. Bitcoin becomes more relevant to investors precisely at the moment when the central bank can no longer do whatever it wants. It becomes a non-sovereign, scarce, politically neutral asset.

The paradox becomes even more interesting: if reform fails and fiscal dominance reasserts itself, the Fed will have to monetize imbalances again, which will discredit fiat currency once more. In that case, Bitcoin gains again, but for different reasons.

When Bitcoin Truly Gains

The message for Bitcoin is not simple. It does not gain because a Central Bank is strong. Bitcoin gains when the financial system shows its limits, regardless of which of the previous scenarios materializes. Over the next four years, the financial system will be more than just linear – it will be challenged from multiple directions simultaneously. During this period of testing the monetary architecture, assets promising independence will become increasingly relevant.