Rhythm BlockBeats in-depth analysis | January 31, 2026
1. The Boot Drops: From Candidate to Nominee
On January 30, 2026, U.S. President Trump officially announced the nomination of former Federal Reserve Governor Kevin Warsh as the next Federal Reserve chairman. This decision marks the end of months of speculation and brings this 54-year-old economist into the spotlight of global financial markets.
Looking back at the market games of the past two months, Warsh's victory has not been smooth sailing. As early as December 2025, Trump had mentioned Warsh alongside Kevin Hassett in an interview as "two great Kevins," while the prediction market data from Polymarket had shown Warsh's lead even earlier. Now that the official nomination has landed, the market can finally start pricing the policy path of this new chairman.
Notably, Wash's father-in-law is Ronald Lauder, head of Estée Lauder Companies, who has had a deep friendship with Trump for decades. While this relationship has sparked some discussions about the independence of the Federal Reserve, more importantly, it may suggest that Wash has smoother communication channels with the White House—especially critical in the context of Trump's frequent pressure for interest rate cuts.
II. "Concurrent Rate Cuts and Balance Sheet Reduction": The Policy Paradox Revealed by Deutsche Bank
Deutsche Bank accurately anticipated Wash's policy proposals in its report from December 2025: support for rate cuts, but requiring simultaneous reduction of the balance sheet. This seemingly contradictory combination actually reflects Wash's dissatisfaction with the Federal Reserve's aggressive monetary policy over the past 15 years.
2.1 Wash's Critique of QE History
Wash's criticism of quantitative easing has a long history. In 2010, when the Federal Reserve launched its second round of quantitative easing (QE2), Wash, then a board member, cast a dissenting vote and soon resigned. In a recent speech, he recalled:
"In the summer and autumn of 2010, during a period of robust economic growth and financial stability, I was extremely concerned that the decision to purchase more treasury bonds would embroil the Federal Reserve in the complex political affairs of fiscal policy."
Wash believes that persistent QE may not only trigger inflation and financial stability risks but also divert the Federal Reserve from its core monetary policy responsibilities, interfering in credit allocation that could distort market signals. He even proposed the concept of "Fiscal Dominance," arguing that the Federal Reserve, by artificially lowering interest rates, is actually facilitating the accumulation of U.S. government debt.
2.2 Regulatory Reform: Prerequisites for Policy Combination
Deutsche Bank pointed out that whether the unique combination of "rate cuts + balance sheet reduction" can be implemented hinges on whether regulatory reforms can reduce banks' reserve requirements. Currently, the Federal Reserve's reserves are at a "sufficient" level, and it has recently restarted its reserve management purchasing program. Only under conditions of relaxed bank regulations and declining reserve requirements can balance sheet reduction not conflict with rate cut goals.
This judgment resonates with current voices within the Federal Reserve. Vice Chair Bowman and board member Milan have both raised similar arguments, but whether these changes can be realized in the short term remains uncertain. For the crypto market, this means that the liquidity environment may present a "nominal easing, substantive neutrality" complex state.
III. The Dual Facet of the Crypto Market: Hawkish Undertones and Bitcoin Friendliness
Wash's nomination has sparked intense discussions in the crypto community. This divergence precisely reflects the duality of Wash's policy stance: a hawkish undertone in monetary policy and an open attitude towards Bitcoin.
3.1 Short-term Pressure: Expectations of Liquidity Tightening
During his tenure as a board member during the global financial crisis, Wash held more hawkish views than his colleagues, especially regarding balance sheet issues. In September 2024, he explicitly stated he did not support the Federal Reserve's decision to cut interest rates by 50 basis points. This position implies that even if Wash supports rate cuts, the pace may be more cautious than the market expects.
According to the latest data, the Federal Reserve has paused interest rate cuts in its January 2026 meeting, maintaining rates in the range of 3.50%-3.75%. Notably, this decision saw two dissenting votes, with board members Milan and Waller (both nominated by Trump) advocating for a continued 25 basis point rate cut. This internal division suggests that even with Wash's appointment, the Federal Reserve may struggle to balance between "Trump pressure" and "inflation control."
For the crypto market, a longer period of higher interest rates + faster balance sheet reduction speed = pressure on risk asset valuations. Bitcoin fell to $92,664 (-2.8%) after the announcement, with leveraged long liquidations reaching $227 million within 24 hours, reflecting this logic.
3.2 Long-term Benefits: The Dawn of Regulatory Normalization
However, Wash is not an enemy of the crypto industry. On the contrary, he has described Bitcoin as "a sustainable store of value, similar to gold." This statement is extremely rare among the Federal Reserve's senior leadership and has earned him the label of "Bitcoin friendly."
More importantly, Wash's criticism of the Federal Reserve's "mission creep"—including intervention in climate and inclusivity issues—suggests he may advocate a return to the core functions of monetary policy, reducing active intervention in the crypto industry. For an industry suffering from SEC regulatory uncertainties, this is akin to a timely rain.
Moreover, Wash's supportive attitude towards central bank digital currencies (CBDC), although contrary to decentralization principles, may accelerate the clarification of the U.S. digital asset regulatory framework. Within a clear rule system, compliant crypto innovations may actually gain more development space.
IV. Market Structure Evolution: Institutional Game in the ETF Era
The timing of Wash's appointment (May 2026, coinciding with Powell's term ending) coincides with a critical period in the institutional transformation of the crypto market. Understanding this background is crucial for judging future trends.
4.1 Warning Signals from ETF Fund Flows
In 2025, the total net inflow of Bitcoin spot ETFs in the U.S. reached $22.94 billion, but in November and December, there were net outflows of $3.16 billion and $1.64 billion, respectively, setting a record for the longest consecutive outflow since listing. This trend continued in January 2026, with a net outflow of about $4.8 billion over three consecutive months.
However, structural changes are occurring. Despite a negative return of -9.6% for BlackRock's IBIT in 2025, it attracted a net inflow of approximately $25.4 billion, ranking sixth in the annual ETF fund inflow list and being the only fund among the top ten with negative returns. Bloomberg analyst Eric Balchunas referred to this phenomenon as the "HODL clinic"—long-term asset allocators are gradually building positions with price declines rather than engaging in momentum trading.
This "price decline, capital influx" differentiation is corroborated by the current on-chain data showing Bitcoin exchange reserves dropping to a seven-year low, while whales accumulated 34,666 BTC in five days. Institutional capital is viewing short-term volatility as a buying opportunity rather than a risk signal.
4.2 Interaction between Federal Reserve Policy and Institutional Allocation
Reflecting on the interest rate adjustment mechanism of the Federal Reserve you previously shared, the December 2025 FOMC meeting lifted the daily limit of $500 billion on the Standing Repurchase Facility (SRP), allowing banks to borrow from the Federal Reserve using treasury bonds as collateral without restrictions. This change significantly increased market liquidity and provided a macro backdrop for the rebound of the crypto market.
After Wash took office, if he adheres to the path of balance sheet reduction, it may partially offset this liquidity easing. However, at the same time, his criticism of traditional QE may prompt funds to flow from the treasury market to assets with stronger inflation-hedging properties—Bitcoin is the biggest beneficiary of this logic.
V. Strategic Outlook: Finding Anchors in Uncertainty
In the face of the policy uncertainties brought by Wash's appointment, investors need to establish a multi-dimensional analytical framework:
5.1 Short-term Tactics: Focus on Key Support
The technical outlook shows that Bitcoin is short-term oversold but remains resilient on a daily basis, with key support at $90,337 (close to the $91,000 level you analyzed earlier), and Ethereum support at $3,086. Longs are advised to set stops at $90K (BTC)/$3K (ETH), with leverage controlled below 5 times, targeting a risk-reward ratio of ≥1.5:1.
5.2 Medium-term Layout: Rebalancing between Gold and Bitcoin
Combining your previously proposed allocation strategy—gold as a risk control anchor (30%-40% position), with the remainder allocated to Bitcoin and quality mainstream coins—this framework appears particularly robust before Wash's policy becomes clear. Gold can provide a hedge amid monetary policy uncertainty, while Bitcoin benefits from Wash's perception as "digital gold" and potential regulatory easing.
5.3 Long-term Perspective: Independence and Credibility Game
Deutsche Bank emphasized in its report that new chairpersons always need to earn market trust, and against the backdrop of Trump's demand for significant interest rate cuts, this challenge is even more daunting. Regardless of how Wash ultimately balances "presidential pressure" and "central bank independence," the market will undergo a period of increased volatility.
For the crypto market, this represents both risk and opportunity. In a more institutionalized and compliant environment, quality assets that can navigate policy cycles will gain a premium. Wash's nomination may well be the catalyst for this transformation.
Kevin Wash's nomination marks a potential entry into a "unconventional normalization" phase for the Federal Reserve—using traditional tightening tools (balance sheet reduction) alongside unconventional easing signals (rate cuts), walking a tightrope between controlling inflation and responding to political pressure.
For the crypto market, this means that the simple logic of "Federal Reserve easing = price increase" may fail, replaced by in-depth analysis of policy details, regulatory attitudes, and market structure. At this turning point, investors need not only courage but also the patience to understand the evolution of complex systems.
The market is writing a new narrative, and Wash will be the key author of this narrative.
What are your thoughts on the crypto market trends following Wash's appointment? We welcome you to share your views in the comments, and like, share, and follow us for more in-depth market analysis! #贵金属巨震 #美国PPI数据高于预期 #下任美联储主席会是谁？ #CZ币安广场AMA $BTC
