Kraken maps three Fed scenarios under Warsh that may move crypto

On April 15, Kraken chief economist Thomas Perfumo described three Federal Reserve scenarios linked to Kevin Warsh’s possible confirmation as Fed chair. He said each path implies different liquidity outcomes and would influence positioning in cryptocurrencies and other risk assets.

The baseline, called “The Grind,” assumes policy continuity with the federal funds target remaining in a 3.25% to 3.75% range through the end of 2026. Under that scenario, the Fed’s balance sheet would expand modestly through Treasury bill purchases. Perfumo projected crypto trading would likely stay rangebound, with major moves driven by sector-specific events rather than broad shifts in liquidity.

The second scenario, labeled “Soft Pivot,” envisions Warsh winning confirmation and guiding two to three rate cuts totaling up to 75 basis points. Balance sheet operations would stay largely steady but could tilt toward longer-duration Treasury purchases as a form of yield-curve management. Perfumo said that setup would moderately favor risk assets and digital tokens.

The most accommodative path, “Run It Hot,” pairs faster rate reductions with looser balance sheet policies and potential regulatory changes aimed at expanding liquidity. In that case, Perfumo described a configuration that would likely support larger capital flows into equities and cryptocurrencies.

Perfumo highlighted near-term events that markets will watch for signs of which scenario is likely. Those include Warsh’s confirmation hearing scheduled for April 21, the Treasury refunding announcement on May 6 and the Federal Open Market Committee press conference on June 17. He also noted developments in an investigation involving the Federal Reserve, including expectations of an appeal after a judge denied subpoenas.

President Donald Trump nominated Kevin Warsh on March 4 to succeed Jerome Powell when Powell’s term ends on May 15. The confirmation process has faced delays tied to financial disclosure paperwork, and Senator Thom Tillis has indicated he will block a vote until a Department of Justice inquiry involving Powell is resolved.