Kevin Warsh’s push for a new Fed–Treasury “deal” is dominating the mainstream market debate: whether Washington is drifting toward a soft-rate, high-liquidity regime that tends to favor hard assets, including bitcoin and crypto, or whether it’s raising bond stakes.
The debate erupted after Bloomberg reported that Kevin Warsh floated the idea of a “new deal with the Treasury Department,” echoing a 1951 agreement that redefined the relationship between the two agencies. Bloomberg reported over the weekend that the idea may meet with limited stimulus from officials, but a more ambitious effort could see “increasing volatility and concerns about the US central bank’s independence,” depending on how clearly it links the Fed’s balance sheet decisions to Treasury funding.
Overriding this view is the political pressure to treat debt servicing costs as a policy constraint. Bloomberg pointed to interest costs “running at an annual clip of about $1 trillion,” and quoted Tim Duy of SGH Macro Advisors as warning that the deal could be read as little more than procedural changes. “Instead of including the Fed, it could look like a yield control framework,” Duy said. “The public agreement that aligns the Fed’s balance sheet with Treasury funding clearly links fiscal performance to deficits.”
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In bitcoin circles, the deal discussion is interpreted through the lens of yield-curve control (YCC) and debt monetization, not just a policy-level approach. Luke Gromen put it bluntly, citing a recent FFTT opinion: “Our basic case is that Warsh will be as sophisticated as Trump needs.” He added the usual punchline of great traders: “Statistics > Narrative (again).”
“Our basic case is that Warsh will be as sophisticated as Trump needs.” -FFTT, last week
Statistics > Narrative (again) pic.twitter.com/aHMDlz2jzM
— Luke Gromen (@LukeGromen) February 8, 2026
Commentator Lukas Ekwueme took this argument further: “Warsh, the next Fed chairman, will increase credit. He favors the control of the yield curve. This means fixing US short-term interest rates at an artificially low level. The Fed commits to buying unlimited amounts above that level to lower interest rates.”
That being said, the Fed’s pegs fall to “automatically low” and support the peg with potentially limited purchases – Ekwueme’s structure compared to the World War II era. He pointed out that the political logic is straightforward: appointing someone who is “more hawkish than Powell” would conflict with Trump’s attack on the Fed for being too hawkish, making it a less consistent outcome.
Bull Theory, a crypto-focused account, emphasized the historical parallels while insisting that Warsh’s public framework is about reducing the Fed’s delay in funding the government over the long term. The account says Warsh may opt for a portfolio shift toward Treasury debt, a smaller balance sheet, and clear limits on when large bond-buying programs can take place — possibly “in close cooperation with the Treasury Department on debt issuance.” But it also warned that the market should not confuse “restrictions” with “tightening” if the result is a mix of policy that depresses real yields and keeps liquidity conditions light.
CoinFund President Christopher Perkins added: “I continue to think that the crypto markets got Warsh’s appointment wrong. The new Fed-Treasury deal is the plan…it always has been. More communication, or any change in responsibilities to Scott Besent and the US Treasury will improve crypto IMO–if things are right. At least for the next 3 years.”
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In bitcoin, the main question is the direction of the real yield and the reliability of the anchor “independence” because both are related to how investors call fiat debasement risk and lack of liquidity.
The pro-crypto interpretation is volatile: if the deal turns into a structure that closes parts of the curve or lowers real yields, it can push more money out of the risk-free complex and into an asset that behaves as an inflation hedge or other long-term hedge. The Bull Theory puts it in a clear way: “If the Warsh framework leads to a reduction in real yields, rate reductions, and easy liquidity conditions, generally supporting risky assets such as equities, gold, and crypto.”
The caveat is that similar setups can increase volatility in stock markets. Bloomberg signaled that an ambitious deal could confuse investors about the Fed’s independence, while Bull Theory argued that reducing the Fed’s support for long-term yields and heavy Treasury issuance could flatten the curve and raise long-term premiums.
For crypto traders, that combination can create a two-speed system: a supportive account of liquidity on the right side, and models to reduce sudden risk if bond volatility spills over into broader financial conditions.
At press time, BTC traded at $69,151.
The featured image was created with DALL.E, a chart from TradingView.com
