Fed Rate Cut Bets Shift After Warsh Nomination, Crypto Traders Reassess Outlook

Crypto traders are recalibrating their expectations for U.S. Federal Reserve rate cuts this year following President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair. The shift has introduced fresh uncertainty around future monetary policy, a key driver for risk assets like Bitcoin and the broader crypto market. Historically, expectations of lower interest rates have supported crypto rallies, including last year’s surge that pushed Bitcoin to new all-time highs.

According to Polymarket betting data, traders now assign a 27% probability to two Fed rate cuts in 2026. The chances of three, one, and four cuts stand at roughly 25%, 18%, and 13%, respectively. This marks a notable change from earlier expectations, when three rate cuts were seen as the most likely outcome before Warsh’s nomination. Since then, Bitcoin has pulled back from highs above $80,000, reflecting growing caution among investors.

Much of the debate centers on whether Warsh should be viewed as hawkish or dovish. Market observers point to his tenure as a Fed governor from 2006 to 2011, particularly during the global financial crisis, when he was reluctant to cut rates due to inflation concerns. Even in April 2009, with unemployment near 9% and core PCE inflation at just 0.8%, Warsh warned about upside inflation risks. Critics argue that stance looks overly cautious in hindsight.

However, supporters suggest Warsh’s views may have evolved. Analysts note his close association with investor Stanley Druckenmiller and his openness to the idea that economic growth can occur without triggering inflation, especially amid structural changes such as artificial intelligence and productivity gains. Druckenmiller himself has said it is unfair to label Warsh as permanently hawkish.

President Trump has repeatedly emphasized his desire for lower interest rates and has stated that he expects Warsh to support rate cuts. Crypto commentator Anthony Pompliano has echoed this view, predicting aggressive easing and a potential “historic rotation” into risk assets. Others, like analyst Sam Badawi, take a more cautious stance, noting Warsh’s call for a new Fed–Treasury accord could raise questions about Fed independence and inflation risks.

Meanwhile, near-term expectations remain muted. CME FedWatch data shows only a 17% chance of a 25-basis-point cut at the March FOMC meeting, with an 82% probability that rates remain unchanged. For crypto markets, clarity on Warsh’s policy stance may prove crucial in shaping sentiment and price direction in the months ahead.