Fed’s 2026 Regime Change Could Fuel Bitcoin Rally, Strategist Warns

Alex Krüger’s scenario, detailed in a post titled “2026: The Year of the Fed’s Regime Change,” is anchored in personnel changes. He notes that prediction platform Kalshi placed the odds of Kevin Hassett becoming Federal Reserve chair at 70% as of December 2. Krüger describes Hassett, a former Trump advisor, as a supply-side loyalist championing a “growth-first” philosophy. This view holds that with the inflation war largely won, maintaining high real interest rates is “an act of political obstinacy rather than economic prudence.” Trump himself added fuel to this speculation hours after Krüger’s post, telling reporters he would announce his Fed pick early next year and explicitly teasing Hassett as a possible choice.

Krüger reconstructs Hassett’s dovish stance from his 2024 comments. On November 21, Hassett stated, “the only way to explain a Fed decision not to cut in December would be due to anti-Trump partisanship.” He has consistently argued for lower rates, endorsing expected cuts as merely “a start,” calling for the Fed to “keep cutting rates aggressively,” and supporting “much lower rates.” Krüger places him at a 2 on a 1–10 dove–hawk scale, with 1 being the most dovish.

Institutionally, Krüger maps a concrete transition path: Hassett would first be nominated as a Fed governor to replace Stephen Miran when his short term expires in January 2025, then elevated to chair when Jerome Powell’s term ends in May 2026. Krüger assumes Powell would resign his remaining Board seat, opening a slot for Kevin Warsh, whom he treats as a like-minded ally campaigning for a structural overhaul. In this configuration, Hassett, Warsh, Christopher Waller, and Michelle Bowman would form a solidly dovish core, with only two clear hawks on the committee.

On interest rates, Krüger argues that both the official Fed dot plot and market pricing understate how far monetary policy could be pushed lower. The September median projection of 3.4% for the federal funds rate in December 2026 is, he says, “a mirage,” because it includes non-voting hawks. By re-labeling dots based on public statements, he estimates the true median among voting members is closer to 3.1%.

Substituting Hassett and Warsh for Powell and Miran, and using Miran and Waller as proxies for an aggressive-cuts stance, Krüger finds a bimodal distribution with a dovish cluster around 2.6%. He notes Miran’s preferred “appropriate rate” of 2.0%–2.5% suggests an even lower bias. As of December 2, futures priced the December 2026 fed funds rate at about 3.02%, implying roughly 40 basis points of additional downside if Krüger’s path is realized.

Krüger frames the likely outcome as a “reflationary steepening”: front-end yields collapsing as aggressive easing is priced in, while the long end stays elevated on higher nominal growth and lingering inflation risk. If Hassett’s supply-side view is correct and AI-driven productivity pushes inflation below consensus forecasts, he expects pressure for even deeper cuts to avoid “passive tightening” as real rates rise.

Krüger argues this monetary policy mix is explosive for risk assets like Bitcoin. A Hassett-led Fed would “crush the real discount rate,” fueling a multiple-expansion “melt-up” in growth equities. A politically aligned Fed that explicitly prioritizes growth over inflation targeting is, in his words, textbook bullish for hard assets such as gold, which he expects to outperform Treasuries as investors hedge the risk of a 1970s-style policy error.

Bitcoin, in Krüger’s analysis, should be the cleanest expression of this shift but is currently trapped in its own psychology. Since what he calls the “10/10 shock,” he says Bitcoin has developed “a brutal downside skew,” fading macro rallies and crashing on bad news amid “4-year cycle” top fears and an “identity crisis.”

Despite this, he concludes that the combination of a Hassett-led Federal Reserve and Trump’s deregulation agenda would “override the dominant self-fulfilling bearish psychology, in 2026.” This represents a macro repricing he insists “markets aren’t ready” for yet. At the time of his analysis, Bitcoin traded at $92,862, a level Krüger implies does not reflect the seismic shift he anticipates from the USD’s central bank.