Recent months have seen frequent disagreements between U.S. President Donald Trump and Federal Reserve Chairman Jerome Powell, particularly on interest rate reduction. Trump wishes to lower rates to stimulate the economy, but Powell has defied the pressure to keep inflation at bay and safeguard the autonomy of the Fed.
Now, rumors have resurfaced that Trump may fire Powell, a move that shook the markets. Although these talks aren’t new, they gained fresh attention recently. Trump later denied plans to fire Powell, saying it would only happen in case of fraud but he did admit discussing the idea with Republicans.
Trump Wants Rate Cuts and Powell Resists
As per Trump, lower interest rates boost the economy in the short term. They inject liquidity and may help him win political favor. On the other hand, Powell has his other reasons. His job is to carefully balance inflation and employment, not chase political gains.
Powell also wants to keep the Fed independent from politics. If markets lose trust in that independence, it could become harder for the U.S. to sell Treasury bonds, a serious problem with $30 trillion in national debt. Higher borrowing costs could hurt the economy badly.
Recently, Trump called Powell a “major loser” and hinted at firing him, which shook the markets. Though he later said he wouldn’t fire Powell “for now,” the uncertainty has left investors, especially in crypto, on edge.
Immediate Impact on Bitcoin
If Jerome Powell is removed from his position as Fed Chair, markets are likely to expect immediate interest rate cuts. That’s because Trump has been pushing for lower rates, and a new Fed chair may follow that direction.
We already saw how the market reacted to this idea. When news came out that Powell might be fired, Bitcoin jumped from around $118,000 to $119,000. Investors were excited, hoping that a new Fed leader would support crypto and cut rates.
Lower interest rates mean more money in circulation. It’s easier to borrow, invest, and spend. This also weakens the U.S. dollar, and when the dollar is weak, Bitcoin tends to move higher. When Bitcoin moves higher, it typically helps to lift other cryptocurrencies as well. If Bitcoin does initiate a rally, altcoins such as Ethereum, Solana, and others may also move higher.
Also, Bitcoin has historically tracked the Nasdaq, increasing and decreasing in line with technology stocks. But recently, BTC has indicated that it is breaking out of that habit. If Trump removes Powell, it could hasten an actual decoupling, making Bitcoin act more like digital gold rather than a tech stock.
Stablecoins in Trouble
Stablecoins such as USDT and USDC are collateralized with U.S. Treasury bonds. They use these bonds to retain their value. However, if there’s a crisis at the Federal Reserve and people lose trust in U.S. debt, bond prices could drop. Stablecoins would thus become undercollateralized, i.e., they wouldn’t have sufficient backing for their entire value.
If that occurs, individuals will flock to redeem or sell their stablecoins, triggering panic within the market. This would result in huge liquidations within DeFi, where numerous smart contracts rely on stablecoins. While Bitcoin may increase, the remainder of the crypto market can plummet, particularly DeFi platforms and smaller tokens linked to stablecoins.
If people around the world stop trusting the Fed, global trade might move away from the U.S. dollar. This could lead to more use of China’s digital yuan or euro-backed stablecoins. With that, stricter rules from China and Europe may follow, and more people might turn to Bitcoin instead of government-controlled digital money.
Trump firing Powell could mark the biggest turning point for Bitcoin since 2009. Whether it’s a bull run or a breakdown, one thing is clear that Bitcoin’s moment of truth is near.
Also Read: Trump Swings Powell’s Firing Odds on Kalshi From 42% to 19%
