With a probability of 30%, town professor Waller has become the hottest candidate for Fed Chair.

Author: Ethan (@ethanzhang_web3), Odaily

On the morning of September 12, Beijing time, the U.S. federal funds rate market released a highly clear signal: the probability of the Federal Reserve cutting interest rates by 25 basis points at this month's meeting has reached 93.9%. After five consecutive "holding steady" decisions, the market has finally welcomed a directional shift in monetary policy. Meanwhile, another gamble concerning the future direction of the Fed over the next two years is quietly advancing: who will succeed Powell as the next chair of the Federal Reserve?

On the decentralized prediction platform Polymarket, as of the same day, current Fed Governor Christopher Waller leads with a 30% probability, ahead of the other two "Kevin faction" competitors—Hassett (16%) and Waller (15%). However, the market also retains a more dramatic possibility: the probability that "Trump will not announce a successor by the end of the year" remains the highest at 41%.

This series of data indicates that the market is simultaneously betting on two directions: one is the consensus of an interest rate cut path, and the other is the still uncertain battle for the monetary helm. And in between these two, Waller's name repeatedly appears in various trading perspectives and policy games.

Why has the market started to "believe in Waller"?

A story of an "atypical Federal Reserve governor": How a small-town professor was pushed to the forefront?

Waller's background and experience seem out of place in the Federal Reserve system. He is not Ivy League educated and has not held significant positions at Goldman Sachs or Morgan Stanley; he was born in a small town in Nebraska with a population of less than 8,000. Starting from Bemidji State University, he obtained a bachelor's degree in economics. In 1985, he earned a Ph.D. in economics from Washington State University and began a long academic career, teaching and researching at Indiana University, the University of Kentucky, and the University of Notre Dame for a total of 24 years.

After that, he spent 24 years in academia researching monetary theory, focusing primarily on central bank independence, term structures, and market coordination mechanisms. In 2009, he left campus and joined the Federal Reserve Bank of St. Louis as the research director, until 2019 when he was nominated by Trump to the Federal Reserve Board. This nomination process was fraught with controversy, and the confirmation process was not smooth, but ultimately, on December 3, 2020, the Senate approved his appointment by a narrow margin of 48 to 47. Entering the highest decision-making body of the Federal Reserve at the age of 61, Waller is older than most governors, but this has become an advantage; he carries less baggage, does not owe favors to Wall Street, and having spent time at the St. Louis Fed, he understands that the Federal Reserve is not a monolith, and differing voices are not only tolerated but sometimes encouraged.

This path allows him to have professional judgment while retaining the freedom of expression, without being categorized as a spokesperson for a particular faction. From Trump's perspective, such figures might be more easily "available for use"; while in the eyes of the market, such candidates mean "less uncertainty."

However, in a power transition game intertwined with bureaucracy and political will, Waller is not the kind of candidate who is naturally favored by the market. His career trajectory is relatively academic and technical, and he is neither known for public rhetoric nor has he frequently appeared on financial television.

But it is precisely this kind of person who has gradually become a frequently mentioned "consensus candidate" in various market instruments and political commentary. The reason lies in his triple compatibility:

First, the monetary policy is flexible, but non-speculative.

Waller is neither a typical "inflation hawk" nor a proponent of easy monetary policy. He advocates that policies should move with economic conditions: supporting interest rate cuts in 2019 to preempt a recession; favoring rapid interest rate hikes in 2022 to curb inflation; and in 2025, amidst an economic slowdown and declining inflation, he became one of the first Federal Reserve governors to vote in favor of interest rate cuts. This "non-ideological" policy style stands out as scarce in the current highly politicized Federal Reserve landscape.

Second, the political relationship is clear, and the technological image is extremely clean.

Waller was nominated by Trump to the Federal Reserve Board in 2020 and is one of the few monetary policy officials within the Republican establishment who can achieve "technological neutrality" and "political compatibility." He is neither seen as a "Trump loyalist" nor excluded by the party establishment, and this unique middle position gives him a broader political maneuvering space amid intense partisan competition.

Unlike the strongly opinionated and partisan Hassett, and in stark contrast to the Wall Street-connected Wash, Waller exhibits a more pure technocratic quality. He is more easily seen as "a trusted professional," and in the context of highly polarized American politics, this depoliticized, competence-based image actually makes him a solid and easily accepted appointment candidate.

Third is the attitude towards encryption technology, which has a "tolerance" within the system.

Waller is not what you would call a "crypto believer," but he is one of the most vocal proponents of topics such as stablecoins, AI payments, and tokenization within the Federal Reserve system to date. He does not advocate for government-led innovation and opposes CBDCs, but supports private stablecoins as tools for improving payment efficiency, suggesting that "the government should build the infrastructure like building highways and leave the rest to the market."

Among traditional finance and digital assets, compared to the other two candidates, he may be the only Federal Reserve official clearly signaling "public-private collaboration."

Sense of smell and sense of rhythm: he knows when to speak up and when to keep quiet.

In July of this year, the Federal Reserve held its summer FOMC meeting. Although the market generally expected to "keep interest rates unchanged," a rare scene occurred at the meeting: two board members, Waller and Michelle Bowman, cast dissenting votes, arguing that interest rates should be immediately lowered by 25 basis points.

This "minority veto" is not common within the Federal Reserve. The last time a similar situation occurred was in 1993.

Just two weeks before the vote, Waller had already revealed his stance at a central bank seminar at New York University. His public remarks clearly advocated that "current economic data supports a moderate rate cut." On the surface, this was a technical "advance communication"; but in terms of rhythm, it was a release of political signals. At that time, Trump had mixed feelings towards Powell, having previously criticized Powell repeatedly on Truth Social, demanding an "immediate rate cut." Waller's vote and speech did not completely align with the president, but they also did not provide cover for Powell. He skillfully positioned himself between "policy adjustment" and "technical independence."

In a highly politicized Federal Reserve environment, directors who can strike a balance and know when to make statements appear to have more leadership qualities.

Trump criticized Powell for "poor and incompetent" management of the construction of the Federal Reserve building.

If the upper position is reached, how will the crypto market react?

The crypto market's concern over "who will steer the Federal Reserve" has never been just idle gossip; it is a triple reflection of policy expectations, market sentiment, and regulatory pathways. If this time it is indeed Waller who takes the chairman position, then we need to seriously consider how the three types of roles will reprice the future.

Firstly, for stablecoin issuers and compliant tracks, it is a large-scale opening of the "regulatory dialogue window".

Waller has repeatedly expressed clear opposition to central bank digital currencies (CBDC) in his speeches, stating that they "cannot solve the market failures of the existing payment system," and instead emphasized the advantages of private stablecoins (such as USDC, DAI, PayPal USD, etc.) in improving payment efficiency and facilitating cross-border settlements. He stressed that regulation should come from "Congressional legislation rather than agency overreach," and called for "these new technologies not to be stigmatized."

This means that if he becomes the chairman, projects like Circle, MakerDAO, and Ethena are expected to enter a "period of institutional path determination," no longer constantly in the gray area between the SEC and CFTC. More importantly, Waller's concept of "market dominance, government facilitation" may encourage associated institutions like the Treasury and FDIC to collaboratively formulate a regulatory framework for stablecoins, promoting the implementation of policies for "licensing, reserve standardization, and information disclosure standardization."

Secondly, for main chain assets like BTC and ETH, it serves as a mid-term umbrella of "positive sentiment + regulatory easing."

Although Waller has not publicly praised Bitcoin or Ethereum, he stated in 2024: "The Federal Reserve should not take sides in the market." This concise statement implies that the Fed will not actively "suppress non-dollar systems" as long as they do not touch the bottom line of payment sovereignty and systemic risk.

This will provide a window of "relatively mild regulatory period" for BTC and ETH. Even if the SEC may still question their securities attributes, if the Federal Reserve does not strongly push for a CBDC, does not block crypto payments, and does not intervene in on-chain activities, then the market's speculative sentiment and risk appetite will naturally improve.

In simple terms, during the "Waller era", Bitcoin may not receive "official endorsements", but there will be natural benefits from the "regulatory side easing".

Third, for developers and native innovators in DeFi, it is a scarce window for "central bank interlocutors."

Waller mentioned "AI payments", "smart contracts", and "distributed ledger technology" on several occasions this year, stating: "We may not necessarily adopt these technologies, but we must understand them." This stance is in stark contrast to the attitude of many regulators who avoid or belittle crypto technology.

This opens up an extremely important space for developers: it does not have to be accepted, but at least it is no longer excluded.

From Libra to USDC, from EigenLayer to Visa Crypto, generations of developers have found their communications with central bank regulators caught in an "parallel universe" awkwardness. If Waller takes office, the Federal Reserve could become the first central bank leader "willing to engage in dialogue with DeFi natives."

In other words, crypto developers may welcome the starting moment of "policy negotiation rights" and "financial discourse power."

Conclusion: Predicting future trading pricing, the chairman's choice sets the pricing direction.

The matter of "Is Waller the new chairman?" currently has no conclusion. However, the market has begun to trade on "how future pricing would be if he were to become chairman." Furthermore, the prediction market's 31% wager on him continues to rise significantly above that of competitors.

At this critical juncture, it is certain that interest rate cut expectations are on the verge of realization; the cryptocurrency industry is seeking a policy breakthrough; and U.S. dollar assets are in a global triangular game of "increased issuance of U.S. bonds - high interest rates - recovery of risk appetite." Waller, as a politically acceptable, policy-predictable, and market-imaginable "successor," naturally becomes the focus of bets.

But perhaps there is another topic worth paying attention to: how will the market readjust these expectations if he ultimately does not become the chairman of the Federal Reserve? And if he really takes office - the ranking of the "next generation dollar system" may just be beginning.