Fed Chair Kevin Warsh’s hawkish shift at the central bank spooked markets and overshadowed the US-Iran deal. Did the crypto bear market just get longer?
The Rundown
- Warsh’s Hawkish Dot Plot Reshapes the 2026 Rate Outlook
- Bitcoin Risks New 2026 Lows, but Positive Crypto Developments Continue
- CLARITY Act Delayed, but Does It Matter Anyway?
- Is It Time for a Sector Rotation?
- What’s on the Radar?
Warsh’s First FOMC: Hawkish Dot Plot Reshapes the 2026 Rate Outlook
Crypto markets tumbled as newly confirmed Federal Reserve Chair Kevin Warsh made a splash at his first FOMC. The Federal Reserve met the consensus expectation (97% probability) of no rate change, holding its benchmark federal funds target range at 3.50–3.75% in a 12-0 vote on June 17. However, Warsh’s comments shook markets.
Warsh effectively ended “forward guidance,” emphasizing productivity and letting markets work. The shift moves away from letting the SEP, dot plot and Fed guidance define market expectations and shape the supposed natural flow of markets.
According to Hyblock CEO Shubh Varma:
“Warsh is signaling that he wants a leaner and more forward-looking Fed. One that’s less focused on managing expectations every quarter the way Powell did, and more focused on actually modernizing how the institution works. On that broad point, they said that most serious people agree this is a good direction. There’s a view that the Fed clearly needs updating for the economy we have today.”
Counter to crypto traders’ expectations, the updated SEP shows that nine of the 19 Fed policymakers now project at least one 25-basis-point rate hike before year-end 2026. Six of those nine project two hikes. That marks a notable shift from the March dot plot, which had pointed toward one cut for the remainder of the year. Markets read the meeting as a regime shift. Bitcoin dropped below $63,000, the S&P 500 fell 1.21% on June 17, the Nasdaq Composite dropped 1.34%, and the 10-year Treasury yield moved to 4.49%.
The bigger-picture shift is that markets received confirmation that the Fed is moving away from the post-2008 to 2020 easy money and manage everything era. It is now moving toward something more rules-oriented and focused on stable money, and less of “the Fed will always bail out the economy with cuts maneuver.”
Bitcoin Risks New 2026 Lows, But Positive Crypto Developments Continue
Bitcoin’s (BTC) market structure and technicals still lean toward new price lows in 2026. Despite the inflation and monetary policy outlook, there are new positive developments within crypto markets.
BlackRock’s Premium Income ETF launched last week and Goldman Sachs has also filed to launch a similar product. The trend towards $200 million to $300 million in daily Bitcoin ETF outflows finally tapered off after a 13 consecutive day selling period. While outflows resumed, they are less severe than the week prior.
Spot Bitcoin ETF flow data. Source: CoinMarketCap
Strategy dipped their toes back into the water with a $100 million Bitcoin buy, showing some smart money entities are nibbling on discounted BTC. However, the drop below par of Strategy’s Stretch (STRC) preferred stock dominated media headlines and possibly investor sentiment.
CLARITY Act Delayed, But Does It Matter Anyway?
President Trump’s crypto czar, Patrick Witt is sticking with his “make it law by July 4” target for signing the CLARITY Act into law. But Crypto in America’s Eleanor Terrett says the math doesn’t add up, with Senate priorities and the tight timeline making a floor vote before July 4 unlikely.
What is clear is that the crypto market has taken the view of “if it happens, it happens.” With the emergence of new narratives, does Clarity becoming law as fast as possible even matter for trader positioning?
Hyperliquid’s performance as a decentralized exchange stands as a perfect example of this. Its ties to TradFi, including recent talks with Nasdaq, show how quickly the market is moving. So do the huge trading volumes seen in its oil futures, tokenized stocks, pre-IPO futures and SpaceX perpetual futures. Together, they demonstrate a broader pattern of innovators, Big Tech and Wall Street moving steps ahead of policymakers.
Hyperliquid’s move-fast-and-break-things style is moving financial infrastructure forward, demonstrating the validity of its use case — and in some ways, forcing the hand of US lawmakers.
Is It Time For A Sector Rotation?
A handful of fund managers agree that Bitcoin is discounted but acknowledge that investors are riding outperformers in AI and energy stocks as a better trade. This is leading to a passive or hands-off approach to BTC. Its recent drop to $59,000 was accompanied by $4.4 billion in ETF outflows, making them net negative year-to-date.
Beyond Strategy propping up the market with future multi-billion dollar buys, markets need to see ETF flows turn positive for a sustained period of time before Bitcoin and other majors react positively.
What’s On The Radar?
Currently, there are a lot of moving parts to keep up with and they’ll continue to impact crypto pricing. A more enlightening way of forecasting a way forward is to consider the following:
- What impact will the US MoU with Iran have on oil prices and energy prices down the line? Will falling oil prices poke a hole in expanding inflation?
- Will the AI buildout, wild energy markets and a euphoric IPO season continue to dominate investor mindshare and capital flows? Or will investor interest shift in Q3, Q4?
- WIll Warsh hike in Q3 or Q4?
Beyond those scenarios, crypto prices will likely depend on spot Bitcoin ETF demand, assets in newly launched Bitcoin income ETFs, Strategy’s buying and moves by other corporate digital asset treasuries.
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