What is the impact of the upcoming inauguration of the new Federal Reserve on the price trend of Bitcoin Trump will take the oath of office for the new Federal Reserve Chairman Kevin Warsh at the White House tomorrow. For the MAGA camp, this moment has been waiting too long. They believe that Powell has damaged the credibility of the Federal Reserve and plagued the institution with scandals. No one will miss him. What does Wosh, the receiver, want to do? The direction released by The Wall Street Journal is that he wants to reshape the Federal Reserve. Over the past two decades, Walsh's economic policy framework has been consistent. He walked into the building with a clear blueprint. But the Federal Reserve has its own bureaucratic system and rules of procedure. The new chairman will face his colleagues at the conference table next. How much Walsh's transformation plan they can accept determines the future direction of US monetary policy. So, what impact will Walsh's new appointment have on the price trend of Bitcoin? 1、 Walsh's Three Propositions of 'Carrying Doves Among Eagles' Walsh is not a pure hawk, nor is he a pure dove - he is a 'dove within an eagle'. These three things will determine the fate of Bitcoin. Proposition 1: Interest rate cuts (dovish honey) Walsh advocates returning interest rates to a "financial condition neutral" position, following the market's pre priced path of interest rate cuts. The impact on BTC: The expectation of interest rate cuts itself is bullish, but can interest rate cuts be implemented? In April, CPI was 3.8% year-on-year and PPI was 6.0% year-on-year, indicating that the inflationary environment does not support aggressive interest rate cuts. A Reuters survey shows that most economists do not expect the Federal Reserve to cut interest rates before the end of 2026. Reducing interest rates is like saying honey on the lips, and the difficulty of implementation is extremely high. Proposition 2: Shrinking the balance sheet (the true teeth of hawks) This is where Walsh is truly hawkish, and also the most undervalued part of this policy shift by the market. Walsh advocates further reducing the Federal Reserve's $6.7 trillion balance sheet. The impact on BTC: Interest rate cuts lower short-term interest rates, but balance sheet cuts raise long-term interest rates that truly affect asset valuations - this is the 'steepening of the interest rate curve'. The correlation between Bitcoin and the size of the Federal Reserve's balance sheet is much higher than its correlation with interest rates. If Walsh cuts interest rates by 50 basis points but shrinks the balance sheet by $500 billion, the net liquidity effect may be negative. Proposition 3: Reduce transparency (the most unfamiliar script in the market) Walsh criticized the dot matrix for making officials "prisoners of their own words" and advocated for the cancellation of the dot matrix and a reduction in the frequency of FOMC meetings. The core concept is that 'unpredictable' itself is a policy. The impact on BTC: The market will lose the policy "guidance" it has relied on for the past decade, and the long-term average volatility will be structurally elevated. Options have higher hedging costs and greater volatility - which is a systemic bearish trend for highly volatile Bitcoin. 2、 The curse of changing coaches in history: every handover, Bitcoin plummets! Yellen took over in 2014 → Bitcoin subsequently plummeted 84.68% Powell takes over in 2018 → Bitcoin drops 73.5%, S&P 500 drops 20% Powell's re-election in 2022 → Bitcoin falls another 61.35%, S&P 500 falls 24% Now that Walsh has taken over, the market is concerned that the speed of asset price correction may be faster. Within three months of the inauguration of a new Federal Reserve chairman in history, the average yield on US bonds rose by about 50 basis points. If this pattern were to repeat itself, the 10-year US Treasury yield could rise to 4.93%, and the suppression of Bitcoin would be structural. 3、 What is the market pricing? The interest rate market has' surrendered ': the probability of keeping interest rates unchanged in June is close to 100%, and the probability of a rate cut before 2027 has plummeted from 96% at the beginning of the year to 38.2%. The probability of interest rate hikes is increasing, with a probability of about 75% in December - which is completely opposite to Trump's direction of requesting interest rate cuts. The red light is on in the US bond market: the 30-year US bond yield has exceeded 5.16%, reaching a new high since 2023. Hanett, Chief Investment Strategist of Bank of America, warns that if the 30-year US Treasury yield completely falls behind the "Maginot Line" of 5%, it will be the "door to the apocalypse". Risk assets are bleeding: Bitcoin has been falling for several consecutive days, setting a record for the longest consecutive decline in nearly four months. The negative correlation between the S&P 500 and 10-year US Treasury yields has dropped to -0.8, reaching an extreme historical level. 4、 Overall judgment: Walsh's' three-tier impact 'on Bitcoin Expectations of interest rate cuts: Short term gains, expectation game, support sentiment of interest rate cuts supported by "pigeon talk"; Shrinking balance sheet: Medium term bearish, 1-2 years, long-term interest rate increase+liquidity tightening; Reduce transparency: Long term bearish, persistent, structural increase in volatility; 5、 Core Conclusion Walsh's appointment is not about 'all the benefits come out', but about 'uncertainty landing'. The most likely path he will take is to lower interest rate expectations and push forward with balance sheet tightening. For Bitcoin in the fifth wave of decline, this combination: Short term: There is a possibility of a "boot landing" technical rebound (expected interest rate cut game); Mid term: balance sheet reduction promotion+long-term interest rate increase+volatility rise=structural bearish; Long term: The Federal Reserve's "more unpredictable" means that the medium-term macro environment for Bitcoin is deteriorating, and the macro catalyst for the fifth wave of decline is in place. Walsh's hawkish teeth are "shrinking the balance sheet", dovish honey is "cutting interest rates", and the situation is "meeting transparency" - the three interweave to create a new era of the Federal Reserve with a "steeper bond yield curve, higher stock market volatility, and lower policy predictability". Compared to Bitcoin, this is not a starting signal for a bull market, but a further confirmation of medium-term suppressive factors. Bitcoin BTC Market Analysis: Walsh Takes Office, Federal Reserve's 5th Wave Begins