Why is Bitcoin falling despite pro-crypto Kevin Warsh becoming Fed chair?

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BTC/USD daily chart. Source: TradingView Key takeaways: Bitcoin’s sell-off came as the 2-year US Treasury yield climbed to 4.14%, its highest level since February 2025. US 2-year bond yield daily chart. Source: TradingView The 2-year yield is closely tied to where traders expect the federal funds rate to move in the near term. Its move above the Fed’s current 3.50%–3.75% target range suggests markets are no longer betting on quick easing under Warsh. CME data shows traders now expect the Fed to keep rates unchanged for most of 2026, with futures pricing pointing to a possible 25 basis point hike in December. Target rate probabilities for the December Fed meeting. Source: CME Over the past three decades, the Fed has typically raised rates when the 2-year Treasury yield moved above the federal funds rate, as the gap suggested markets were pricing in tighter policy ahead, according to data provided by BCA Research. US 2-year Treasury yield vs. US Fed fund target rate. Source: BCA Research Conversely, when the 2-year yield fell below the Fed funds rate, it often signaled expectations for future rate cuts. Related: Bitcoin ETFs snap 5-day inflow streak as BTC dips under $80K Such a shift weakens the bullish case for BTC, which typically benefits from falling yields, lower real rates and easier liquidity conditions. In the past, Warsh has spoken favorably about Bitcoin, criticized central bank digital currency, and backed a larger role for private-sector financial innovation. For crypto traders, that checks several bullish boxes. But from a monetary-policy perspective, Warsh may still challenge the bullish Bitcoin narrative, according to analyst Crypto Patel. In a Saturday post, Patel noted that Warsh is "a known inflation hawk," not a dove, adding that a difficult macro backdrop, including Iran war-driven inflation risks and labor-market pressure, may keep him from slashing rates. "Crypto-friendly on regulation is NOT the same as dovish on rates," he said. Another warning comes from Bitcoin’s historical reaction to Fed leadership changes. In a Saturday post, analyst Lucky noted that BTC has struggled during previous chair transitions: it fell 84% after Janet Yellen took over in January 2014, 73% after Jerome Powell started in February 2018, and 60% after Powell began his second term in May 2022. Source: X Warsh’s takeover has so far coincided with a sharp BTC decline, suggesting traders may again be de-risking as they wait for policy clarity from the new Fed chief. More on the subject

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