The current market is in a macro repricing phase driven by policy expectations. The leadership of the Federal Reserve may undergo a new round of changes, and if Kevin Warsh smoothly takes over, there will be new policy orientations in terms of interest rate paths, balance sheets, and inflation frameworks. Meanwhile, the debt environment and monetary system, which have been expanding for over a decade, are intensifying the market's reevaluation of "monetary purchasing power".

Looking back at the development of Bitcoin, it was born after the 2008 financial crisis, coinciding with multiple rounds of quantitative easing by the Federal Reserve. From the massive balance sheet expansion during Ben Bernanke's tenure, to market skepticism during Janet Yellen's time, and then stress testing under a 5% interest rate environment during Jerome Powell's leadership, Bitcoin has continuously reshaped its market positioning through different policy phases. Especially after the approval of the spot Bitcoin ETF in 2024, the "currency devaluation trade" gradually entered mainstream institutional narratives.

In this context, the potential changes in the Federal Reserve's policy direction are becoming an important variable affecting the Bitcoin narrative.

Evolution of the Monetary Cycle: From Quantitative Easing to Tightening Cycle, Bitcoin Completes Narrative Restructuring

Over the past decade, the Federal Reserve's policy cycle has provided a continuously evolving macro backdrop for Bitcoin. The quantitative easing under Bernanke marked the first systematic attention to fiat currency expansion issues, laying the foundation for Bitcoin's narrative as a "fixed supply asset". During Yellen's tenure, the price of Bitcoin rose from around $300 to nearly $17,000, gradually entering mainstream view; however, it was still widely regarded as a highly volatile speculative asset.

After entering Powell's administration, Bitcoin faced a more complex cycle of tests. Early rate hikes and balance sheet reductions caused its price to decline by more than 80% from its 2017 peak. Subsequently, during the pandemic, the Federal Reserve expanded its balance sheet by nearly $3 trillion in a matter of weeks, reinforcing the market's recognition of "monetary expansion". In 2021–2022, after Bitcoin surged to $69,000, it retraced by about 75%, indicating it still has properties of a risk asset.

However, a key change occurred in 2024: the approval of the spot Bitcoin ETF, leading to the gradual acceptance of the "currency devaluation trade" by institutions. At the same time, the U.S. federal debt has risen to about $39 trillion, and Bitcoin has not exited the mainstream market view under high interest rate environments, completing a phased transition from a fringe asset to a macro asset.

Policy Shift and Uncertainty: Under the Warsh Path, Reinforcement and Disturbance of the Bitcoin Narrative

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

From the Bitcoin perspective, this assessment has somewhat reinforced the "currency devaluation narrative". If the Federal Reserve acknowledges the long-term impacts of past balance sheet expansions, the market will re-evaluate the stability of the monetary system, which supports Bitcoin's emphasis on fixed supply. At the same time, Warsh's clear opposition to central bank digital currencies (CBDCs) undermines a previously considered potential competitive path as a systemic alternative to Bitcoin.

However, significant disturbances persist in the short-term macro environment. On one hand, oil prices have risen above $100, and tightening energy supply has shifted the market's initial expectation of "three rate cuts this year" to consider the possibility of interest rate hikes; on the other hand, the energy demand driven by AI infrastructure investments could push inflation levels higher before the realization of productivity dividends. Internal models even indicate that a scenario where CPI rises to 6% cannot be ruled out.

Moreover, if balance sheet reductions proceed too quickly against the backdrop of continuous U.S. Treasury issuance, long-term interest rates may rise, putting pressure on risk assets. Conversely, if inflation is systematically underestimated, it may also weaken the Federal Reserve's institutional credibility.

The above viewpoints are derived from BIT on Target, Contact Usfor the complete BIT on Target report.

Disclaimer: The market is risky, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may 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 made based on the information provided in this content.

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