Nearly 68% of traders are pricing in an interest rate hike of at least 25 basis points by December 2026, according to CME FedWatch. Bitcoin is trading near $75,800 after breaking critical support. Consumer sentiment just hit a record low. By every conventional measure, the Federal Reserve under new chairman Kevin Warsh appears locked into a tightening path.
But author, Bitcoin investor, and market analyst Lawrence Lepard is making the opposite case — and his argument deserves serious attention precisely because it runs so directly against the current consensus.
Lepard's thesis: Warsh will cut, not hike
Lepard argued that signals from other senior US economic officials point toward rate cuts rather than hikes under Warsh. He specifically cited Kevin Hassett, director of the White House National Economic Council, and Treasury Secretary Scott Bessent as having made comments consistent with a rate-cutting trajectory in 2026.
His framework for how Warsh gets there: "Warsh will cut. He will use the AI productivity and trimmed inflation excuses and will claim that all the war inflation is transitory." In Lepard's read, Warsh will frame the inflation generated by the Iran conflict and Strait of Hormuz oil disruption as temporary and supply-side in nature — the kind of inflation that passes on its own without requiring monetary tightening — while pointing to AI-driven productivity gains as a structural disinflationary force that justifies easier policy.
That framing has historical precedent. The Fed used "transitory" language extensively during the 2021 to 2022 inflation surge before abandoning it — a decision that cost the central bank significant credibility. Whether Warsh would be willing to revive a similar framework, and whether markets would accept it, is the central question Lepard's thesis raises.
Trump's signals reinforce the rate cut narrative
At Warsh's swearing-in ceremony on Friday, President Trump said the US would tackle its rising national debt through "growth" — language that signals a preference for an expansionary monetary environment and lower interest rates. Trump also said "we want to stop inflation, but we don't want to stop greatness" — a statement met with skepticism from investors and economists who noted the tension between fighting inflation and pursuing growth simultaneously.
Trump's track record of publicly pressuring the Fed on rates — he repeatedly called on outgoing chair Jerome Powell to cut rates and said he would be disappointed if Warsh didn't move immediately to ease policy — provides additional context for Lepard's argument. The question is not whether Trump wants rate cuts. It is whether Warsh will prioritize White House preferences over the inflation data that currently makes cuts extremely difficult to justify on conventional monetary policy grounds.
The consensus: 68% probability of rate hikes
The market consensus sits firmly in the opposite direction. CME FedWatch shows nearly 68% of traders pricing in a rate hike of 25 basis points or more by December 2026 — a dramatic shift from February's 96% rate cut expectations. The move reflects the cumulative impact of back-to-back hot CPI and PPI readings, oil above $100 per barrel, record-low consumer sentiment of 44.8, and rising long-term inflation expectations of 3.9% on the UMich 5-year measure.
In April, US lawmakers scrutinized Warsh's commitment to preserving Federal Reserve independence at his Senate Banking Committee confirmation hearing, with Senator Elizabeth Warren raising potential conflicts of interest around Trump family crypto businesses and the new Fed chair's own investments in AI and digital asset companies.
What a rate cut would mean for Bitcoin and crypto
The stakes for crypto markets are significant. If Lepard is correct and Warsh pivots toward cuts — or even signals a more dovish posture than markets are currently pricing — the impact on Bitcoin and risk assets could be rapid and substantial. Rate cut expectations were the primary macro tailwind driving Bitcoin's recovery from $60,000 to $83,000 between February and May. The reversal of that expectation — from cuts to hikes — has been the primary macro headwind driving the retreat back toward $74,000 to $76,000.
A credible dovish signal from Warsh, even short of an actual rate cut, could reverse months of ETF outflow pressure, ease the options market hedging demand that has kept downside protection expensive, and restore the institutional risk appetite that briefly pushed Bitcoin toward a breakout above its 200-day moving average.
Conversely, if the consensus is correct and Warsh raises rates — or simply maintains the current restrictive stance while markets wait for clarity — Bitcoin and crypto stocks could face what some analysts have described as several months of declining asset prices as uncertainty over the rate path continues to weigh on positioning.
The bottom line
Lepard's contrarian view — that Warsh will ultimately cut rates by framing conflict-driven inflation as transitory and leaning on AI productivity as cover — is a minority position against a strong consensus. But it is not an implausible one. The White House's clear preference for lower rates, combined with the geopolitical de-escalation now potentially underway through the Iran peace deal negotiations, could give Warsh the political and economic justification he needs to move toward easing faster than markets currently expect.
How Warsh communicates in his first public appearances as Fed chair — and whether he distances himself from or aligns with the rate-cutting expectations Trump has signaled — will be the most important variable for Bitcoin and crypto markets in the weeks ahead.