From 2011 to 2026: Why Changing the Fed Chair Causes Bitcoin and Gold to Plummet?

Recently, Donald Trump announced the nomination of Kevin Walsh as Chairman of the U.S. Federal Reserve (Fed), and immediately both the crypto and gold markets began to decline sharply. This event is not coincidental but a reaction from investors to a significant change in the outlook for global monetary policy. To understand better, we need to look back at history and recognize that 2011 was a pivotal year—this is when Kevin Walsh began participating in shaping U.S. economic decisions.

Kevin Walsh: From 2011 and the Tightening Monetary Policy Strategy

Kevin Walsh is not a new figure in finance. He was educated at two of the world’s top universities—Stanford and Harvard—before joining Morgan Stanley, one of the most reputable investment banks in the U.S. The period from 2006 to 2011 was crucial for him, as he sat on the Federal Reserve Board of Governors. During those years, especially during the 2008 financial crisis, Walsh directly witnessed how the Fed used quantitative easing (QE) to stimulate the economy. At that time, the Fed purchased large amounts of U.S. government bonds and injected enormous liquidity into the financial system.

Experience from 2008-2011 shaped his unique perspective on monetary management during crises. Unlike the current approach of adjusting interest rates—used by Jerome Powell—Walsh believes that this alone is insufficient to control inflation. He advocates a more aggressive approach: reducing the money supply through quantitative tightening (QT) by shrinking the Fed’s balance sheet.

Two Completely Different Approaches to Monetary Policy

Powell’s Approach: Flexible and Gradual

Jerome Powell, the current Fed Chair whose term ends in May 2026, primarily uses interest rate adjustments as a tool. When inflation rises sharply, he raises interest rates, making U.S. Treasury bonds more attractive (with higher safe yields). Investors then sell riskier assets—including Bitcoin and gold—to buy government bonds, pulling money out of the markets and curbing inflation.

Walsh’s Approach: Decisive and Comprehensive

Kevin Walsh favors keeping interest rates relatively low and stable but focuses on shrinking the Fed’s balance sheet. After the bonds purchased by the Fed in the past mature, Walsh will not reinvest the proceeds but let the money exit the system. This means the total money supply will decrease significantly.

Liquidity Reduction = Bitcoin and Gold Plunge

This is the direct reason why Bitcoin and gold prices dropped immediately after the announcement of Walsh’s nomination.

During the years when the Fed pumped money into the economy (2008-2023), excess liquidity led investors to seek dynamic assets like Bitcoin and gold. As markets tighten and liquidity diminishes, investors tend to limit their capital flow into these speculative assets. Instead, they prioritize safer or more fundamental investments.

Immediately after the announcement, Bitcoin fell to $66.03K (-2.24%) and gold (PAXG) dropped to $4.94K (-2.53%), reflecting market concerns about a Fed tightening under Walsh’s leadership. Traders are recalibrating their portfolios, anticipating a world with less circulating money in the economy.

Different Capital Flows, Different Approaches

The change in Fed chairmanship is not just about the individual but about monetary philosophy. Walsh’s experience from 2011 taught him that tightening monetary policy is highly effective in controlling inflation. Meanwhile, Powell tends to balance economic growth and price stability more cautiously.

With Walsh’s nomination, investors worldwide—especially those invested in Bitcoin and gold—are realizing that the U.S. is about to enter a phase where money circulation will decrease. This is a significant turning point, marking a shift from a “cheap money” economy to a “tight money” environment—and this transition is directly impacting the value of Bitcoin, gold, and many other assets globally.

In the coming weeks, markets will continue to monitor the Senate’s confirmation process for Walsh, and Fed’s incremental decisions will continue to shape investor actions worldwide.