Warsh vs Hassett: Trump's bet on the future of monetary policy and its implications for Crypto

After the meeting between Trump and Kevin Warsh at the White House last week, the landscape of the Federal Reserve succession has taken an unexpected turn. What appeared to be a unilateral race by Kevin Hassett for the presidency has transformed into a nearly tied contest between two candidates. In Polymarket’s December 16 predictions, Warsh reached a 45% probability, officially surpassing Hassett, who registered 42%, a dramatic reversal considering that just two weeks earlier Hassett was leading with over 80%. This change reflects something deeper than a simple repositioning of bets: it represents a fundamental decision about the nature of monetary liquidity over the next four years.

The shift in Trump’s preferences: from unconditional loyalty to pragmatism

Trump publicly revealed that Warsh is now his top choice, stating that both Kevins are “excellent” and that with Warsh there is a “quite clear” alignment on monetary policy. This comment, which might seem balanced, actually places Warsh front and center after a meeting that the media described as much more substantive than previous encounters.

What changed the equation? The answer lies in a combination of political capital and fundamental tactical differences. First, Warsh enjoys an extraordinary network of influence: his father-in-law is Ronald Lauder, the billionaire heir of Estée Lauder and a longtime Trump supporter. Beyond this, Warsh maintains close ties with Treasury Secretary Bessent and has received public backing from Jamie Dimon, CEO of JPMorgan, who noted that Hassett could push for rate cuts that are too aggressive, unleashing inflationary pressures.

In contrast, Hassett seems to have made a strategic miscalculation. Attempting to demonstrate his “independence” from bond traders worried about his dependence on Trump, he made public statements emphasizing the supremacy of data over presidential opinion: “His opinion will carry no weight, it will only be relevant if supported by data.” While these statements reassure fixed-income managers, they probably irritated Trump, who seeks a “collaborative” partner, not another Powell questioning his priorities. This premature display of independence has undoubtedly been recorded as a significant negative point.

Warsh: the “almost president” who never left the circle of power

Warsh is not an improvised candidate. In 2017, during Trump’s first term, he was the last defeated contender by Jerome Powell in the battle for the Federal Reserve chairmanship. Powell was strongly supported by then-Treasury Secretary Mnuchin, leaving Warsh at the door. But Warsh never left the Trump radar. Last year, Trump considered nominating him for Treasury Secretary, confirming that he remained “at the emperor’s heart.”

His career is almost impeccable: graduated in Economics and Statistics at Stanford, PhD in Law from Harvard Law School, spent years at Morgan Stanley advising on mergers and acquisitions before becoming special assistant for economic policy in the Bush Jr. administration, where he served as executive secretary of the National Economic Council. These twenty years navigating the highest circles of Wall Street, combined with his position as a young member of the Federal Reserve Board (was the youngest governor in the institution’s history at 35), position him as an insider of the U.S. financial system.

Two radically different visions of monetary policy

The implications of this choice go far beyond a simple personnel change. Warsh and Hassett represent two completely opposite monetary logics.

Hassett: continuous expansion and subordination to the White House. His stance would suggest a Federal Reserve open to aggressive rate cuts to please the executive, probably resulting in what could be called a “liquidity festival.” In the short term, Nasdaq and Bitcoin could experience significant gains. However, the cost would be losing control of inflation and the gradual erosion of the dollar’s credibility as a global reserve currency.

Warsh: structural reform through monetary discipline. As a historic critic of quantitative easing (“anti-QE”), Warsh has been a keen observer of the Fed’s balance sheet abuses. In fact, he resigned from his position in 2010 due to his firm opposition to QE2. His philosophy is clear: “If we are more discreet with the money printer, our rates can be lower.” This means he would seek to contain the money supply through an aggressive reduction of the balance (QT) to anchor expectations of lower inflation, creating room for more moderate nominal rates. Deutsche Bank suggests that a Fed under Warsh would likely combine cooperation with Trump on rate cuts with an accelerated balance sheet reduction.

Beyond the technical issue of rates, Warsh criticizes what he calls the Fed’s “mission expansion.” He believes the institution should stick to its core function—defending the value of the currency and price stability—instead of taking on responsibilities that belong to the Treasury, such as climate policies and financial inclusion. His vision is one of “restoration,” not revolution: preserving the fundamental structure of the Fed while removing distortions from the last decade.

Implications for Crypto and digital assets

For the Crypto ecosystem, this dichotomy presents a short-term versus long-term dilemma. If Warsh takes over, liquidity withdrawal will undoubtedly be an immediate challenge. Accustomed to a regime of continuous monetary “feeding,” Bitcoin and altcoins could face pressure in an environment of aggressive QT and higher rates for longer.

However, Warsh could be a surprisingly valuable long-term ally. He is a staunch supporter of free markets and deregulation, and has expressed optimism about the U.S. economy experiencing a productivity boom driven by AI similar to that of the 1980s. More significantly, Warsh is one of the few high-level economic officials who has invested real capital in Crypto, including the stablecoin project Basis and Bitwise, a crypto index fund manager. This direct investment suggests that his understanding of the sector goes beyond academic theory.

In a context of “disinflation” achieved through monetary discipline, Crypto could benefit from a stronger dollar, healthier financial markets, and a renewed appetite from institutional investors for alternative assets in an environment of more “real” rates.

The business risk: Warsh’s tightrope walk

Of course, the alignment between Warsh and Trump is not complete. Warsh is a committed free trade advocate and has publicly criticized Trump’s tariffs, fearing they could lead to “economic isolationism.” Although he recently stated he would support rate cuts even under a tariff regime, this fundamental rift persists. How he navigates the tension between “maintaining dollar credibility” and “meeting Trump’s demands for tariffs and easing” will be his greatest test as Federal Reserve chair.

Final reflection: the CEO is already known

The choice between Warsh and Hassett is, in essence, a decision between two diametrically opposed market trajectories. Choosing Hassett means subordinating the Federal Reserve to the short-term goals of the White House, quick gains in risk assets followed by long-term monetary vulnerability. Choosing Warsh involves precisely calibrated monetary surgery: short-term liquidity abstinence pain, but a more solid positioning for long-term capital growth.

But one fact remains unchanged: in 2020, Trump could only criticize Powell from Twitter. In 2025, after returning with a mandate of significant proportions, Trump has made it clear that his role has evolved. Whether Warsh or Hassett presides over the Federal Reserve, the true director of this play is, without any ambiguity, Trump. The question is not who will control the Fed, but how directly Trump will exercise that control and under what regulatory framework.