Bitcoin drops to a two-month low as markets brace for a hawkish Fed chair

Bitcoin fell to a two-month low, sliding 2.5% to about $82,300. The drop accelerated after reports that Kevin Warsh may become Donald Trump’s pick to lead the Federal Reserve. Expectations of tighter monetary conditions hit the crypto market and fueled a stronger dollar.

Traders fear Warsh – known for criticizing the Fed’s expanded balance sheet – would favor stricter liquidity conditions. Bitcoin and other digital assets have historically benefited from periods of aggressive stimulus, including balance-sheet expansion. A potential reversal of that policy is viewed as a signal to rotate out of risk assets.

Since reaching its all-time high in October, bitcoin has shed a third of its value. The current decline marks the fourth straight monthly drop – its longest losing streak in eight years.

Analysts say the market’s reaction reflects investors “resetting” for an environment of higher real rates and shrinking dollar liquidity. Damien Boey, portfolio strategist at Wilson Asset Management, noted that even expectations of tightening trigger corrections in assets once seen as hedges against Fed balance-sheet growth, including gold, crypto, and bonds.

Ether tracked bitcoin lower, falling 2.9% to around $2,735.

The crypto pullback contrasts with trends elsewhere: gold continues to hit record highs, and U.S. equities remain resilient. Digital assets, which previously showed some correlation with rising stock indexes, are again under pressure from macro expectations and dollar strength.

Another factor was a wave of global risk-off sentiment after Microsoft shares fell 10% on earnings that showed higher AI-related expenses and only moderate revenue growth. Some analysts say concerns about an “overheating AI market” contributed to weakness in crypto assets.

Markets now await Trump’s official choice for Fed chair. Any indication he favors a candidate inclined toward tighter policy could deepen pressure on bitcoin, which has lost momentum for months and remains disconnected from rallies in traditional assets.