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\n\t\t\t\t\t\t\t\t\tThe main BTC signal was not rate cuts, but Warsh’s stated intention to shrink the Fed’s balance sheet and pull liquidity from the system.\t\t\t\t\t\t\t\t<\/p>\n<\/p><\/div>\n
On Tuesday, Kevin Warsh, Donald Trump\u2019s choice to replace Federal Reserve Chair Jerome Powell, testified before the Senate Banking Committee.<\/p>\n
He promised to be independent from the White House but did not promise to cut rates right away, leaving market watchers to try and figure out what a Warsh-led Fed would mean for liquidity and risk assets like Bitcoin (BTC).<\/p>\n
The hearing had plenty of headline moments. Warsh told senators the Fed has \u201clost its way\u201d and needs fundamental reform.<\/p>\n
He said<\/a> under sworn testimony that Trump never asked him to commit to rate cuts at any specific meeting, a claim that clashed directly with Trump\u2019s own statement to CNBC the same morning, where the president said he\u2019d be \u201cdisappointed\u201d if Warsh doesn\u2019t cut immediately after taking office.<\/p>\n Sen. Ruben Gallego did not let that slide<\/a>:<\/p>\n \u201cSomeone here is lying then; it\u2019s either you or President Trump.\u201d<\/p>\n<\/blockquote>\n When Sen. John Kennedy asked if he\u2019d be anyone\u2019s \u201chuman sock puppet,\u201d Warsh was blunt:<\/p>\n \u201cAbsolutely not. I\u2019ll be an independent actor if confirmed as chairman of the Federal Reserve.\u201d<\/p>\n<\/blockquote>\n On crypto, he was straightforward: \u201cCrypto is now part of the US financial system,\u201d and he ruled out a central bank digital currency on his watch.<\/p>\n But the signal that actually matters for Bitcoin wasn\u2019t about rates. Analysis published Tuesday by XWIN Research Japan argued<\/a> that Warsh\u2019s testimony pointed toward something more structural: balance sheet reduction. That\u2019s quantitative tightening, which works by shrinking the Fed\u2019s bond holdings and pulling liquidity out of the system.<\/p>\n As XWIN put it, this targets not just the \u201cprice\u201d of money via rates, but the \u201cquantity\u201d of liquidity itself. The uncomfortable scenario they describe is one where short-term rates fall while long-term yields rise, a combination that has historically been rough for risk assets.<\/p>\n Warsh fed that interpretation directly. He told<\/a> senators the Fed\u2019s balance sheet is too large, should shrink, and that the central bank has no business holding long-term Treasuries.<\/p>\n He also said he\u2019d end the practice of Fed officials as publicly telegraphing rate moves in advance, arguing it locks policymakers into forecasts long after the data has changed.<\/p>\n Bitcoin\u2019s reaction during the hearing was quick. It dropped below $75,000 before recovering, and was trading<\/a> around $78,000 at the time of writing, up about 2.7% over 24 hours and 5.4% on the week.<\/p>\n What XWIN Research finds interesting, though, is what\u2019s happening on-chain underneath all that noise. The Long-Term Holder SOPR, which tracks whether Bitcoin holders are selling at a profit or loss, is sitting around 1.0. That means they\u2019re not aggressively cashing out.<\/p>\n Historically, XWIN noted, it reflects reduced sell pressure and constrained supply. Put simply, despite the macro tightening, the available Bitcoin supply isn\u2019t growing.<\/p>\n Their read on the situation: macro liquidity is weakening while Bitcoin\u2019s internal structure is holding up. That divergence, they argue, points to an accumulation phase rather than a clean breakdown, with the potential for a sharp move higher if ETF demand returns once liquidity conditions shift.<\/p>\n LIMITED OFFER for CryptoPotato readers at Bybit: Use this link<\/a> to register and open a $500 FREE position on any coin!<\/b><\/p>\n<\/div>\n<\/div>\n\n
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On-Chain Data Points the Other Way<\/h2>\n
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