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Bitcoin’s recent bounce is starting to look fragile as political tension in the US keeps growing.

The issue centers around Kevin Warsh, who has been nominated to lead the US Federal Reserve. His confirmation is now stuck in a political standoff, and markets are getting nervous.

US Treasury Secretary Scott Bessent has asked the Senate Banking Committee to move forward with Warsh’s confirmation hearings. This comes even though an investigation into current Fed Chair Jerome Powell is still ongoing.

That investigation is being handled by US Attorney Jeanine Pirro. It focuses on Powell’s testimony about a $2.5 billion renovation project at the Federal Reserve’s headquarters. Prosecutors are checking whether lawmakers were misled about the project’s cost and scope. Powell has denied any wrongdoing and says the probe is politically motivated.

Republican Senator Thom Tillis has said he will block all Fed nominations until the investigation is finished. He has also called Warsh an extreme choice. Bessent pushed back on that view in a TV interview and suggested hearings should begin instead of waiting.

Warsh was nominated by President Donald Trump on January 30. Since then, markets have been uneasy. Warsh is known for his tough stance on inflation and his support for shrinking the Fed’s balance sheet. That approach has worried investors who depend on easy money.

If confirmed, Warsh would replace Powell as head of the Federal Reserve.

Bitcoin reacted quickly when Warsh was nominated. The price dropped nearly $16,000 in a single day. It fell from around $90,000 to near $74,500. This triggered more than $7 billion in liquidations and dragged the total crypto market value down to $2.8 trillion.

More selling followed in the days after. Bitcoin eventually touched a 16 month low near $62,822. It has since recovered and is now trading around $70,000, but confidence remains shaky.

Analysts say the concern is not just about interest rates. Warsh has openly criticized what he calls an oversized central bank. He supports cutting rates while also reducing the Fed’s massive $7 trillion balance sheet.

That combination worries markets. Rate cuts usually help risk assets like Bitcoin. Balance sheet reductions do the opposite by pulling money out of the system. Together, they could cancel each other out.

Bitcoin has historically done best when liquidity is rising. A tighter money environment could lead to slower growth or even further declines.

While Warsh has previously said Bitcoin acts as a kind of policy watchdog, many believe he would focus more on inflation control than supporting markets. This has raised fears that the safety net investors relied on during the Powell era may disappear.

For now, traders are watching key price levels closely.

Some believe the worst of the shock has already passed. Long term holders appear to be buying between $70,000 and $80,000. This has helped stabilize prices.

Others remain cautious. A drop below $70,000 could open the door to a return toward $60,000. That would suggest markets underestimated how serious the policy shift could be.

At this point, Bitcoin’s next move is closely tied to what happens in Washington.

If Warsh shows flexibility during his hearings, confidence could improve. If not, and liquidity fears grow, crypto markets may still face another round of pressure.