James Butterfill, CoinShares’ Head of Research, comments on current market conditions in the crypto sector. His focus: the ongoing Bitcoin correction, the upcoming nomination of the next US Federal Reserve Chair, and regulatory developments in the United States.
Bitcoin Correction: Geopolitics vs. Market Psychology
Bitcoin is currently in a correction phase driven by multiple factors simultaneously. Recent geopolitical stress surrounding Greenland and renewed tariff threats, which are similar to the developments with China last October, are weighing on market sentiment. In addition, sustained selling pressure from large market participants (“whales”) is dragging prices lower in the short term. While the widely cited four-year cycle theory is not fundamentally convincing, it has become increasingly self-fulfilling and is contributing to the current pullback.
Historically, geopolitical shocks tend to follow a similar pattern: events such as the collapse of the Yen carry trade or trade-related disputes initially trigger sharp drawdowns in Bitcoin before a phase of stabilization begins. The trajectory always depends on the specific nature of the event. Against this backdrop, continued short-term pressure followed by recovery appears likely.
Fed Succession: Why the Market May Be Wrong
A second major headwind is uncertainty around the next Federal Reserve Chair. Markets had recently priced in Kevin Hasset, currently serving as a White House adviser, however President Trump signaled that he prefers to keep him in his current role. As a result, Polymarket has moved strongly toward Kevin Warsh, who is considered a pronounced hawk and skeptical of rate cuts. This expectation is visibly influencing Bitcoin sentiment.
This interpretation is largely misguided: in the current environment, Warsh would be poorly aligned with Trump’s repeatedly stated objective of monetary easing this year. A Fed Chair who would categorically rule out rate cuts does not fit the President’s policy direction. Futures markets and prediction markets may therefore be mispricing this scenario.
In the short term, geopolitical risks and the Fed succession question remain defining drivers for Bitcoin. In the medium to long term, however, the familiar pattern persists of geopolitical stress causing volatility but not necessarily structural weakness.
Regulation: The “Clarity Act” in Limbo
On the US regulatory front, delays to the “Clarity Act” are becoming increasingly apparent. Originally designed to establish clear rules for stablecoins and particularly beneficial for Ethereum, is currently being blocked in the US Senate Banking Committee because of a dispute relating to the rewards that are paid to those who own stablecoins. The bill’s original intent risks being diluted by political interests.
