TLDR
- CME data shows March rate cut bets rose from 18.4% to 23% after Trump’s Fed chair nomination.
- Traders now price in a 25 bps rate cut despite Warsh’s hawkish stance on policy.
- Crypto markets adjust to Warsh’s nomination with concerns over reduced liquidity.
- Bitcoin may rise even in high-rate conditions, says ProCap’s Jeff Park.
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Market expectations for a March rate cut have increased to 23%, up from 18.4% last week. The rise follows investor concerns after President Donald Trump nominated Kevin Warsh as the next Federal Reserve Chair, raising uncertainty over the central bank’s policy direction.
Market Shifts on Trump’s Nomination of Kevin Warsh
Investor expectations for a Federal Reserve interest rate cut in March have increased following the nomination of Kevin Warsh as the next Fed chair. According to the CME FedWatch Tool, the probability of a 25-basis-point cut has grown to 23%, up from 18.4% just days earlier.
President Donald Trump nominated Warsh in January to succeed Jerome Powell, whose term ends in May. Warsh is viewed by many investors as a policy hawk, which has caused uncertainty around the Fed’s near-term monetary path.
Despite Warsh’s reputation, traders now appear to anticipate that political and economic conditions may lead the Fed to lower rates sooner. The market’s pricing reflects expectations for only one small cut, with no current signs of a larger or more aggressive easing cycle.
CME Data Shows Rate Cut Probability Climbing
CME Group’s latest data reveals a clear increase in bets on a March cut. The 23% figure represents a marked change in sentiment over a short period. Market participants are watching closely for any signals that the new leadership may take a different approach from the current Fed Chair.
Warsh’s selection has shaken markets to the core, due to his long‑standing views on reducing the Fed’s large balance sheet. Investors are considering the possibility that he could support tighter financial conditions in the long term, even if a short-term cut occurs.
Investor Concerns Over Liquidity and Policy Direction
Warsh has previously spoken in favor of maintaining higher rates to control inflation and reduce the Fed’s balance sheet. This stance has led to declines in some risk assets, including precious metals and cryptocurrencies, in late January and early February.
With Warsh potentially taking the helm at the Fed, investors are adjusting expectations for how monetary policy could evolve. Polymarket data shows that 27% of traders expect two rate cuts this year, while 26% see a possibility of three. Only 13% are betting on four cuts.
Crypto markets, which typically perform better in low-rate environments, may need to adapt to a more stable liquidity backdrop. Warsh’s past criticism of expansionary policy adds uncertainty about how quickly the Fed could ease financial conditions.
Bitcoin’s Outlook May Defy Traditional Trends
While lower interest rates have traditionally been seen as supportive for Bitcoin and other crypto assets, some analysts suggest a shift. Jeff Park, Chief Investment Officer at ProCap Financial, believes Bitcoin’s next major rally could happen even if interest rates stay high.
“This is the mythical, elusive perfect holy grail of what Bitcoin is meant to be,” Park said. He described this stage as “positive row Bitcoin,” where the asset rises despite restrictive monetary policy.
He argued that this would challenge how traditional markets value risk-free returns. Park also pointed out that the coordination between the Fed and Treasury is lacking, and that this could further shape how investors respond to upcoming rate decisions.
