Bitcoin is currently trading near $63,000 as anticipation grows for the expected leadership change at the U.S. Federal Reserve in May 2026. With Jerome Powell preparing to hand over his role to Kevin Warsh, new comparisons with previous Fed transitions are resurfacing within the cryptocurrency community, especially given the market’s recent sluggish momentum.
Historic Fed transitions triggered sharp declines
While equity markets remain close to record highs, Bitcoin stands out as it lingers around 50% below its all-time high of $125,000. Analysts point to an intriguing historical trend: periods of Fed chair transition have often coincided with steep retracements for Bitcoin.
Data reveals that after Janet Yellen took office in 2014, Bitcoin experienced a staggering 83% drop. When Jerome Powell assumed the chairmanship in late 2018, a similar decline of roughly 84% followed. Even Powell’s reappointment in 2022 was paired with a notable 77% downturn for the leading cryptocurrency.
A recurring factor, according to market commentary, is that incoming Fed chairs tend to take a tough stance on inflation, with markets often pricing in tighter policy expectations beforehand. This typically increases pressure on risk assets such as cryptocurrencies.
As highlighted by MacroMicro’s analysis, several common threads explain this pattern. Major institutional players usually trim their exposure to volatile assets when policy uncertainty is high, especially during leadership changes. At the same time, new Fed chairs often deliver strong messages on inflation to bolster their credibility, which can lead to tougher liquidity conditions.
Market expectations themselves tend to amplify these effects. The likelihood of tightening is often priced in even before any official decisions are made. Further complicating matters, external shocks can pile on the pressure: the collapse of Mt. Gox in 2014, the unraveling ICO market in 2018, and the Terra and FTX crises in 2022 all unfolded during Fed tightening cycles.
Could this cycle be different?
Despite these parallels, this transition could diverge from previous cycles. The Fed halted its program of quantitative tightening in December 2025 and resumed its purchases of short-term U.S. Treasury bills. These moves might help sustain more balanced liquidity conditions compared to what occurred in 2018 and 2022.
Glossary: Quantitative tightening is when the central bank shrinks its balance sheet by drawing excess liquidity out of the markets. The FOMC is the Federal Open Market Committee, which sets Fed interest rates and monetary policy decisions.
Researchers now argue that the risk of a deep Bitcoin selloff driven by a Fed transition is less pronounced this time. A steadier liquidity backdrop may eliminate one of the biggest drivers behind previous prolonged crypto bear markets triggered by similar events.
Investors eye Warsh’s policy signals
Still, uncertainty about Kevin Warsh’s likely policy direction remains high. Warsh has established a reputation as a proponent of tighter monetary policy. With inflation indicators intensifying, some expect the June FOMC meeting may not deliver the dovish signals that parts of the market are hoping for.
The report also notes that additional uncertainty comes from U.S. President Donald Trump, who is reportedly pressuring Warsh to favor rate cuts. As a result, investors are advised to look beyond past patterns and focus squarely on the actual policies the new chair will announce.
Ultimately, the deciding factor in the coming period will be whether the Fed pursues a more supportive or restrictive line in its policy. Whether Bitcoin can break the historical pattern seen during previous transitions will largely hinge on this strategic choice.
