On April 7, US President Trump announced that the US and Iran had reached a two-week temporary ceasefire agreement. Following this announcement, international oil prices plummeted—WTI crude dropped more than 19% at one point, and Brent crude fell below the $100 mark. The sharp decline in energy prices immediately eased market concerns about an inflation rebound—an issue that remains the central variable in the Federal Reserve’s decision-making on interest rates.
Catalyzed by the ceasefire news, derivatives pricing showed the implied probability of a Fed rate cut this year surged from 14% to 43%. According to the CME FedWatch tool, this jump occurred within a single day, reflecting the market’s rapid repricing of policy space following the easing of geopolitical tensions. As of April 16, CME FedWatch indicated a 52% probability of a 25-basis-point rate cut in September, with pricing for one rate cut this year rising to 76%.
However, this probability later retreated due to concerns over the stability of the ceasefire agreement’s implementation, dropping to about 23.8% as of April 9. The market has not formed a consensus expectation for easing; instead, it has entered a highly sensitive state—any marginal change in the Middle East situation or Fed statements could trigger dramatic swings in probability.
What Core Issues Will Tonight’s Hearing Focus On?
According to public statements from Senate Banking Committee Chairman Tim Scott, the hearing will center on three major topics: economic outlook, inflation and price stability, and the independence of the Federal Reserve. Kevin Warsh will be asked to clarify his views on interest rate policy, the path for balance sheet reduction, and bank regulation.
One key issue drawing particular attention is whether Warsh will uphold the Fed’s traditional policy independence amid continued pressure from the Trump administration to cut rates. On April 15, Trump stated directly that if Warsh becomes Fed Chair, interest rates will fall—a more explicit position than that of Treasury Secretary Besant. The hearing will serve as the first public test of how Warsh balances political pressure against economic judgment.
Additionally, Warsh has previously voiced support for reducing the Fed’s current balance sheet, which stands at roughly $6.7 trillion—a stance expected to be a focal point for questioning by senators. The path for balance sheet reduction directly affects net liquidity supply in markets and has a structural impact on risk asset pricing.
How Will Political Variables Affect Warsh’s Confirmation Process?
Beyond policy positions, Warsh’s confirmation faces several political obstacles. The Department of Justice is still investigating a renovation project at the Fed, and some Republican senators have stated they will not support the nomination until the investigation concludes. Republicans hold a slim 13–11 majority on the Senate Banking Committee, meaning opposition from any single Republican senator could derail the nomination.
Meanwhile, all 11 Democratic committee members have jointly sent a letter to the chairman requesting the hearing be postponed, citing undisclosed asset information and other concerns. Warsh’s latest financial disclosure shows he and his wife have combined assets of at least $192 million, including investments in cryptocurrency, AI startups, and equity in multiple funds. The transparency of these disclosures will be a focal point for Democratic questioning during the hearing.
Overall, Warsh’s confirmation will not be a smooth process. The hearing is not only a statement of policy positions but also a public stage for political maneuvering.
How Does Warsh’s Policy Framework Fundamentally Differ From the Powell Era?
Warsh is not a newcomer to the Fed. He served as a Fed Governor from 2006 to 2011, becoming the youngest in Fed history at age 35. He resigned in 2011, primarily due to dissatisfaction with ongoing quantitative easing policies.
Warsh left a core judgment: "The fundamental problem with sustained quantitative easing is that it causes capital misallocation in the economy." In 2020, when the Fed again combined monetary expansion with fiscal stimulus, he publicly called it "one of the worst mistakes in Fed history."
This stance sharply contrasts with the Powell era. Powell established an implicit "Fed put"—the market believes the central bank will step in immediately to backstop any shock. Warsh’s logic is to let private markets clear themselves first, with central bank intervention coming later. If this philosophy translates into actual policy, it could mean the Fed responds more slowly to future crises, and the market’s expectation of a "policy floor" for risk assets will be reassessed.
Warsh plans to shrink the Fed’s balance sheet from about $7 trillion to roughly $4 trillion, a reduction far greater than any undertaken during Powell’s tenure. With inflation still above the 2% policy target and core inflation remaining sticky, the pace of executing this framework will have far-reaching effects on global liquidity conditions.
What Does a Fed Chair Open to Bitcoin Mean?
Historically, Fed Chairs have taken cautious or even negative stances on cryptocurrencies. Warsh’s position is markedly different. In an interview at the Hoover Institution, he stated that Bitcoin’s price movements can serve as a "signal" for policy mistakes and described Bitcoin as a "market constraint" on monetary policy. He directly refuted Charlie Munger’s view of Bitcoin as "evil," saying, "Bitcoin doesn’t make me uncomfortable."
Warsh’s engagement goes beyond rhetoric. His financial disclosures reveal equity holdings in Flashnet, a Bitcoin payments startup focused on expanding Bitcoin payment scenarios via the Lightning Network. Such direct risk exposure is extremely rare among Fed Chair nominees.
However, Warsh’s support for Bitcoin should not be interpreted as "loose regulation." He has clearly stated that Bitcoin "is not a substitute for the dollar" and views stablecoin regulation as an issue requiring careful progress. His core position is that cryptocurrency is a new asset class that must be understood within the existing financial system framework, not excluded as an "outlier." For the crypto market, this "understand rather than reject" stance could reduce uncertainty from systemic policy suppression in the long term, but does not mean automatic liquidity easing in the short term.
What Do Swings in Rate Cut Probability—from 14% to 43% and Back—Mean for Crypto Assets?
Crypto assets are classic duration-sensitive assets, with valuations highly responsive to real interest rates and dollar liquidity. Macro analysis widely holds that the Fed’s rate cut trajectory is the single most important macro driver for the crypto market in 2026. A rapid rise in rate cut probability signals increased expectations for lower real rates, theoretically supporting risk asset valuations; a retreat in probability weakens that support.
After the ceasefire announcement, global risk assets saw a brief rally—MSCI Asia Pacific stock index rose 5% to a five-week high, and US stock futures climbed over 2.5%. However, this rally did not translate into a sustained trend in the crypto market. As of April 17, Gate market data shows a 99% probability that the Fed will keep rates unchanged at its April meeting. In the short term, the core issue for the crypto market is not "will rates be cut," but "when will rates be cut" and "will the cut be large enough to reverse the current liquidity contraction."
A deeper issue is the structural changes that may come with the Warsh era—including a major reduction in the Fed’s balance sheet and slower crisis response—which could offset the positive impact of a single rate cut on crypto assets. If a rate cut is accompanied by accelerated balance sheet reduction and widening term premiums, the macro environment for crypto will be more complex than the simplistic "rate cuts = bullish" framework.
Uncertainty Around the Middle East Ceasefire Remains the Biggest Variable for Rate Cut Expectations
The fragility of the ceasefire agreement cannot be ignored. The current ceasefire lasts two weeks and will expire on April 21—the day of Warsh’s hearing. Iran has publicly stated that some ceasefire terms have been violated, while Israel continues airstrikes in Lebanon, making renewed conflict a real possibility.
On April 16, Trump said the US may hold another round of face-to-face talks with Iran this weekend, and if a peace deal is reached, he would consider traveling to Pakistan to sign it. Meanwhile, the US Secretary of Defense has made it clear that if Iran refuses an agreement, US forces are ready to resume military operations at any time.
This "negotiating while preparing for conflict" situation means geopolitical risk has not been eliminated, only temporarily postponed. For the crypto market, this uncertainty means rate cut expectations will likely remain "highly unstable"—if the ceasefire continues, rate cut probability rises; if conflict escalates, probability is pushed back down. After the hearing, market focus will quickly shift to developments before the ceasefire expires on April 21.
Summary
The Fed Chair nomination hearing is not only a critical juncture in Kevin Warsh’s confirmation process, but also an important window for the market to reassess the trajectory of US monetary policy. The sharp swings in rate cut probability—from 14% to 43% and back—following the Middle East ceasefire highlight the extreme sensitivity and instability of current market pricing for policy expectations. Warsh’s policy framework—favoring balance sheet reduction, slower crisis response, and an understanding rather than rejection of crypto—differs structurally from the Powell era. The outcome of the hearing, the uncertainties in the political confirmation process, and changes in geopolitical risk together form the main macro variables the crypto market must digest in the short term. Investors should focus not just on whether Warsh is "hawkish," but also on his deeper positions regarding balance sheet management, inflation commitment, and independence.
Frequently Asked Questions (FAQ)
Q: What steps are required for Kevin Warsh to officially become Fed Chair?
Warsh’s nomination must be approved by the Senate Banking Committee and then confirmed by the full Senate. The hearing is the first public step in this process. After the hearing, the committee will vote internally, then submit the nomination to the Senate floor. Republicans currently hold a slim majority on the committee, but the DOJ investigation and Democratic opposition could complicate the process.
Q: What is the main reason for the Fed rate cut probability falling from 43%?
The market has become concerned about the stability of the ceasefire agreement’s implementation. Iran has publicly stated that some ceasefire terms have been violated, and Israel’s ongoing airstrikes in Lebanon have renewed tensions in the Middle East. Additionally, US core inflation data for March remains above the 2% policy target, limiting expectations for an early Fed rate cut.
Q: How do Middle East geopolitical risks transmit to the crypto market?
There are three main channels. First, geopolitical conflict drives up oil prices, intensifying inflation pressures and forcing the Fed to maintain a tightening stance, which suppresses risk asset valuations. Second, conflict escalation triggers global risk-off sentiment, causing capital to flow out of high-risk assets. Third, Middle East developments affect the dollar’s international liquidity and global capital allocation. In the current ceasefire, all three transmission channels are "alleviated but not eliminated."
Q: What are the crypto market’s main concerns regarding the hearing outcome?
In the short term, the market is watching Warsh’s specific statements on rate policy and balance sheet reduction, especially whether he will provide clear guidance on rate cuts. In the long term, the focus is on structural features of his monetary policy framework—if the Fed’s crisis response shifts from "preemptive intervention" to "reactive intervention," the pricing logic for risk assets will fundamentally change.
