đŸ€‘ Bitcoin’s Ball in 2026: A Tale of Dovish Delights and Trumpian Twists đŸ€‘

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Pray, allow me to impart a most intriguing prognostication from the esteemed macro strategist, Mr. Alex KrĂŒger, who dares to entwine Bitcoin’s forthcoming fortunes with the impending reshuffling of the Federal Reserve. With a wit as sharp as his quill, he declares that investors, in their present state of complacency, grossly underestimate the extent to which American interest rates might plummet under a central bank aligned with the inimitable Mr. Trump. đŸ•”ïžâ™‚ïž

In a missive of considerable length, titled with no small degree of drama, “2026: The Year of the Fed’s Regime Change,” Mr. KrĂŒger boldly asserts that “the Federal Reserve, as we have known it, shall expire in 2026.” He posits that the paramount driver of asset returns shall be a new, exceedingly dovish Fed, helmed by none other than Mr. Kevin Hassett. This shift, he avers, shall prove a pivotal force for risk assets at large, and Bitcoin in particular, in the year 2026-though the crypto markets, in their present state, trade as if no fundamental alteration were afoot. 🩱

The Fed’s Grand Transformation: A Matter of Personnel, Dear Reader

Mr. KrĂŒger’s hypothesis rests upon the matter of who shall occupy the chairs of power. He observes that the prediction platform Kalshi places the odds of Mr. Hassett ascending to the chairmanship at a staggering 70%, as of the 2nd of December. Mr. Hassett, a loyal adherent to supply-side principles, champions a “growth-first” philosophy, declaring that with the inflationary battle largely won, maintaining elevated real rates is an act of political obstinacy rather than economic prudence. 🧐

Mere hours after Mr. KrĂŒger’s discourse, Mr. Trump himself added fuel to the speculative fire, informing reporters at the White House that he would announce his choice for Fed chair “early next year,” and explicitly teasing Mr. Hassett as a potential candidate, having narrowed the field to a single contender. đŸ—Łïž

To elucidate how this might translate into policy, Mr. KrĂŒger reconstructs Mr. Hassett’s stance from his own remarks in 2024. On the 21st of November, Mr. Hassett declared, “The only rationale for the Fed’s decision not to cut in December would be anti-Trump partisanship.” Earlier, he argued, “Were I to sit upon the FOMC, I should be more inclined to cut rates, while Mr. Powell would be less so,” adding, “I concur with Mr. Trump that rates may be considerably lower.” Throughout the year, he endorsed anticipated rate cuts as merely “a beginning,” called for the Fed to “continue cutting rates aggressively,” and supported “much lower rates,” leading Mr. KrĂŒger to place him at 2 on a 1-10 dove-hawk scale, with 1 being the most dovish. đŸ•Šïž

Institutionally, Mr. KrĂŒger outlines a concrete path: Mr. Hassett would first be nominated as a Fed governor to replace Mr. Stephen Miran when his brief term expires in January, then elevated to chair when Mr. Powell’s term concludes in May 2026. Mr. Powell, it is assumed, shall follow precedent by resigning his remaining Board seat after pre-announcing his departure, thereby opening a slot for Mr. Kevin Warsh, whom Mr. KrĂŒger regards not as a rival but as a like-minded ally advocating for a structural overhaul and arguing that an AI-driven productivity boom is inherently disinflationary. In this configuration, Messrs. Hassett, Warsh, Christopher Waller, and Michelle Bowman form a solidly dovish core, with six other officials viewed as persuadable votes and only two clear hawks on the committee. 🩜

The principal institutional risk, in Mr. KrĂŒger’s estimation, is that Mr. Powell might not resign his governor seat. He warns that this would be “extremely bearish,” as it would preclude Mr. Warsh’s appointment and leave Mr. Powell as a “shadow chair,” a rival focal point for FOMC loyalty outside Mr. Hassett’s inner circle. He also stresses that the Fed chair possesses no formal tie-breaking vote; repeated 7-5 splits on 50-basis-point cuts would appear “institutionally corrosive,” while a 6-6 tie or a 4-8 vote against cuts “would be a catastrophe,” transforming the publication of FOMC minutes into an even more potent market event. đŸŒȘ

On the matter of rates, Mr. KrĂŒger contends that both the official dot plot and market pricing underestimate how far policy might be pushed lower. The September median projection of 3.4% for December 2026 is, he declares, “a mirage,” as it includes non-voting hawks; by re-labeling dots based on public statements, he estimates the true voters’ median closer to 3.1%. Substituting Messrs. Hassett and Warsh for Messrs. Powell and Miran, and using Messrs. Miran and Waller as proxies for an aggressive-cuts stance, he finds a bimodal distribution with a dovish cluster around 2.6%, where he “anchors” the new leadership, while noting that Mr. Miran’s preferred “appropriate rate” of 2.0%-2.5% suggests an even lower bias. 📉

As of the 2nd of December, Mr. KrĂŒger observes, futures price December 2026 fed funds at approximately 3.02%, implying roughly 40 basis points of additional downside should his path come to pass. If Mr. Hassett’s supply-side view proves correct and AI-driven productivity pushes inflation below consensus forecasts, Mr. KrĂŒger anticipates pressure for deeper cuts to avoid “passive tightening” as real rates rise. He frames the likely outcome as a “reflationary steepening”: front-end yields collapsing as aggressive easing is priced in, while the long end remains elevated on higher nominal growth and lingering inflation risk. 📈

What This Portends for Bitcoin, Dear Reader

That combination, he argues, is explosive for risk assets such as Bitcoin. Mr. Hassett “would crush the real discount rate,” fueling a multiple-expansion “melt-up” in growth equities, at the cost of a possible bond-market revolt should long yields spike in protest. A politically aligned Fed that explicitly prioritizes growth over inflation targeting is, in Mr. KrĂŒger’s words, textbook bullish for hard assets such as gold, which he expects to outperform Treasuries as investors hedge against the risk of a 1970s-style policy error. 🌟

Bitcoin, in Mr. KrĂŒger’s narrative, ought to be the purest expression of this shift but is currently ensnared in its own psychological trappings. Since what he terms the “10/10 shock,” Bitcoin has developed “a brutal downside skew,” fading macro rallies and crashing on adverse news amid “4-year cycle” top fears and an “identity crisis.” Even so, he concludes that the combination of a Hassett-led Fed and Mr. Trump’s deregulation agenda would “override the dominant self-fulfilling bearish psychology in 2026”-a macro repricing for which he insists “markets are not prepared.” đŸ˜±

At the time of this writing, Bitcoin traded at $92,862. 💰

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2025-12-03 14:14