President Donald Trump’s feud with Federal Reserve Chair Jerome Powell isn’t new. For months, the president has criticized the Fed chair, whom he appointed to the role in 2017, for refusing to lower interest rates. Since Trump entered the White House in January, he has repeatedly called on Powell to step down amid disagreements over rate cuts.
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However, Trump has denied that he plans to fire Powell, saying, “I think it’s highly unlikely, unless he has to leave for fraud.”
Despite reassurances, this kind of political interference could impact financial markets, including crypto.
Here’s what crypto investors need to know if Trump changes his mind and fires Powell.
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Increased Volatility in Crypto Markets
Reports of Powell’s firing have already sent shockwaves through markets. U.S. Treasury two-year yields dropped sharply after a report that the president is likely to fire the Fed chair. Crypto markets, known for their extreme sensitivity to Fed policy signals, would likely experience even more volatility.
Historically, crypto thrives on uncertainty, but only to a point. Since Trump’s Nov. 6 victory, Bitcoin and other cryptocurrencies have surged dramatically. A sudden firing of the Fed chair could trigger risk-on, risk-off behavior from investors. Some might jump into crypto as a hedge, while others might sell amid fears of broader market chaos.
Possible Drop in Interest Rates Could Fuel Crypto Prices
Interest rates are one of the biggest tools the Fed has, and Powell’s removal would create unprecedented uncertainty around monetary policy direction.
Trump has been crystal clear about his demands: he wants the Fed to slash rates by up to three percentage points from the current 4.25%-4.5% range. A new Fed chair aligned with Trump’s vision would likely pursue more aggressive rate cuts than Powell’s approach.
Lower interest rates could mean higher prices for cryptocurrencies, as investors flee low-yield traditional assets like traditional savings and bonds for higher-risk, higher-reward alternatives like crypto. If this happens, Bitcoin and other altcoins could see significant price surges, at least in the short term.
Regulatory Approach Could Shift
Powell’s potential removal isn’t just about interest rates. It’s about the entire regulatory framework surrounding digital assets. The current Fed leadership has maintained a cautious but increasingly open stance toward crypto regulation, with Powell also suggesting that crypto stablecoins “may have a big future,” and he supports work on regulation for them.
A Trump-appointed Fed chair replacement would likely accelerate crypto-friendly policies, potentially removing regulatory barriers that have constrained institutional adoption. The Federal Reserve Board recently announced the withdrawal of guidance for banks related to their crypto-asset and dollar token activities, signaling a trend toward deregulation that could intensify under new leadership.
This regulatory shift could benefit crypto markets. Looser regulations could mean more institutional adoption.
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This article originally appeared on GOBankingRates.com: Here’s What Could Happen to Cryptocurrency if Trump Fires Jerome Powell
