Global markets remain in a phase of risk repricing alongside unfinished, structural deleveraging. While Kevin Walsh’s nomination as Fed Chair has drawn attention to his traditionally hawkish stance and support for faster balance-sheet reduction, this factor alone is not sufficient to trigger a new liquidity crisis.
From a cross-asset perspective, recent cycles show that the once mechanical correlation between the Fed’s balance sheet and US equities has weakened. Even during quantitative tightening, equities have remained resilient, supported by fiscal deficits, corporate earnings, and technology-driven growth. As a result, a more aggressive QT stance under Walsh would more likely translate into higher volatility and capital rotation, rather than a one-way market collapse.
For crypto markets, the key issue is not whether balance-sheet reduction occurs, but whether it creates stress in dollar funding, disrupts the Treasury market, or leads to reserve shortages. Only when such pressures become explicit does risk-asset absorption meaningfully deteriorate. Absent these conditions, tighter policy primarily extends the deleveraging cycle rather than accelerating it.
Bitcoin remains a key barometer of risk appetite. If BTC can maintain structural stability above 75,000, it suggests markets are still pricing systemic liquidity risk conservatively. A breakdown below that level would indicate risk sentiment has yet to fully recover.
Looking ahead, Walsh’s effective policy boundaries remain constrained by bank reserve demand and money-market stability. Should tightening provoke market dysfunction, policy recalibration would likely follow. In the near term, this represents a test of policy style and communication — not the beginning of a new macro storm.
