Powell Probe Dropped, Warsh Takes Over | Will USDT OTC Prices Fall? Hong Kong Investors Guide

What happens at the Federal Reserve does not stay in America. For Hong Kong investors holding or planning to buy USDT, the events of this past week deserve serious attention. The US Department of Justice has officially dropped its criminal investigation into Fed Chair Jerome Powell, and the confirmation of his successor Kevin Warsh now faces virtually no remaining obstacles. Markets are repricing, and Hong Kong's OTC market will feel the ripple effects.

Strip away the legal language and this investigation was always a political pressure campaign. Trump had grown increasingly frustrated with Powell's refusal to cut interest rates aggressively, and used cost overruns in the Fed's headquarters renovation project as a pretext to launch a criminal probe. The strategy backfired in court — federal judges blocked DOJ subpoenas on two separate occasions, ruling that the investigation was designed to pressure Powell into cutting rates or resigning, not to pursue genuine criminal conduct. US Attorney Jeanine Pirro ultimately announced the closure of the investigation, redirecting the cost overrun question to the Fed's own Inspector General. The surface-level explanation is procedural. The real purpose was to clear the Senate confirmation path for Warsh. One detail worth keeping in mind: Pirro explicitly reserved the right to restart the criminal probe if new facts emerge. The political game is paused, not finished.

Kevin Warsh served as a Fed Governor from 2006 to 2011, becoming one of the youngest ever appointed to the role. He played a hands-on part in the Bear Stearns and AIG rescues during the 2008 financial crisis and brings deep crisis management experience to the table. After leaving the Fed, he embedded himself in Silicon Valley's tech investment ecosystem, building relationships across the venture capital world. For crypto markets, Warsh is a genuinely complex figure. Simple labels do not apply:

The crypto-friendly side: He invested in Bitwise Asset Management (issuer of a spot Bitcoin ETF) and Electric Capital, a crypto-focused VC firm. He has publicly called Bitcoin "the new gold for people under 40" and supports Fed engagement with digital money research The hawkish side: He has consistently advocated for monetary discipline, shrinking the Fed's balance sheet, and higher real interest rates — a combination that has historically been unfavorable for risk assets including crypto The contradiction: He has also described most crypto projects as "software pretending to be money" and argued that the crypto boom is largely a byproduct of loose monetary policy, implying it deflates when easy money is withdrawn

Markets already gave their initial verdict when Trump announced the nomination — Bitcoin dropped 6% on the day and fell a cumulative 14% over the following ten days.

This is the question most Hong Kong investors want answered directly, and it requires breaking down into parts. USDT is pegged to the US dollar. The core driver of OTC premiums is not crypto market sentiment — it is USD strength and local supply-demand dynamics. In the short term, the closure of the Powell probe removes an uncertainty overhang. Market sentiment will get a modest lift, but that is not enough to drive a meaningful decline in USDT OTC prices. The premium spread in Hong Kong's OTC market is primarily shaped by:

The stability of the HKD-USD peg Local crypto demand versus available supply Global USD liquidity conditions

If Warsh takes a hawkish stance after taking office, a stronger dollar could actually push up the HKD cost of acquiring USDT through OTC channels, meaning premiums hold steady or widen slightly. Conversely, if he delivers rate cuts as some analysts expect, a weaker dollar and improved crypto market liquidity would increase USDT demand — again, not a scenario that compresses OTC premiums significantly. The bottom line: do not expect this event to trigger a meaningful drop in USDT OTC prices.

From a macro standpoint, here are the factors Hong Kong investors should weigh: The case for building a position now:

Political uncertainty has been removed, and markets tend to stabilise after a prolonged overhang clears Major institutions including J.P. Morgan expect Warsh to pursue rate cuts after taking office, driven by his view that AI-driven productivity gains create room for lower rates without reigniting inflation. If that plays out, it provides meaningful liquidity support for Bitcoin and broader crypto Bitcoin remains in a consolidation range rather than at an obvious momentum high, making phased accumulation a lower-risk entry approach than chasing a breakout Warsh's crypto-friendly background could accelerate the development of clearer regulatory frameworks, which is a long-term structural positive for the industry

Warsh's hawkish instincts are real. If he prioritises balance sheet reduction over rate cuts, liquidity tightens and crypto assets are among the first to suffer Pirro's reservation of the right to restart the probe means political risk has not fully disappeared. Any unexpected development could reignite market volatility For Hong Kong investors, holding USDT in a high-rate environment carries an opportunity cost relative to HKD time deposits, which currently offer competitive yields

Based on the analysis above, here are several concrete steps worth considering:

Phase your entry, avoid going all-in at once: Use a two to three month timeframe, buying in every two to three weeks to average your cost basis across the uncertainty period Watch Warsh's first FOMC statement closely: His first public remarks after taking office in mid-May will set the tone for monetary policy direction. This is the single most important signal for the second half of 2026 Use licensed platforms for OTC transactions: In periods of elevated macro uncertainty, executing through SFC-licensed platforms such as HashKey Exchange or OSL significantly reduces counterparty risk compared to unregulated OTC operators Keep some HKD liquidity in reserve: If policy tightens more aggressively than expected and triggers a sharp market correction, having dry powder available allows you to buy at lower levels rather than being fully committed at current prices

The closure of the Powell probe is a sentiment inflection point, not a direct catalyst for USDT OTC price movement. The real variable is what Warsh does after taking office — whether he prioritises rate cuts or balance sheet reduction will determine the liquidity environment for crypto in the second half of 2026. For Hong Kong investors, this is a moment for careful positioning rather than aggressive action in either direction. Phasing in gradually, managing position size, and operating through compliant platforms is the most defensible strategy during a macro transition of this magnitude. This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets involve significant volatility and risk. Please conduct your own research and assessment before making any investment decisions.