The cryptocurrency market avoided anticipated fallout following US President Donald Trump’s threat to replace Federal Reserve Chair Jerome Powell, which caused the US dollar to weaken and the Stock markets to slump.
According to a report on CNBC, President Trump renewed his attacks on Jerome Powell, describing him as “Mr. Too Late” and “a major loser” for failing to cut interest rates. Powell is a Trump 1.0 appointee to the Federal Reserve’s highest seat in his first presidential term 2017.
Concern over the Impact of Trade Tariffs
The effects of the spat between the President and the FED and Trump’s threat to replace Jerome Powell were felt across the stock markets, with the S&P 500 dropping 2.4%, the tech-heavy NASDAQ dropping 2.5%, and the Dow Jones losing 2.5%, or nearly 1,000 points, according to a report on Google Finance. Experts have associated the stock fall with the tension between Donald Trump and Jerome Powell and growing concern over the impact of trade tariffs.
Writing on his social media platform Truth Social, Trump reiterated the call for lower interest rates, which Jerome Powell has retained at a high of 4.5%. He suggested that:
“Preemptive Cuts’ in Interest Rates are being called for by many […] with Energy Costs way down, food prices […] substantially lower, and most other ‘things’ trending down, there is virtually No Inflation.”
US Dollar Took a Beating
In the same vein, the US Dollar Index also took a beating and slipped over 10% this year, with the green buck falling to a three-year low of under 98 on Monday, April 21, according to data from TradingView. Commenting on the situation, Real Vision founder and CEO Raoul Pal stated:
“Everyone needs and wants a weaker dollar to service their dollar debts […] this is the purest form of global liquidity and is the largest driver of global M2 [money supply] currently.”
Apparent Resilience of Bitcoin
Against all odds, the crypto market seemed unfazed by the Trump threat to replace Powell. It made some gains over the weekend, with the broader crypto industry’s total market capitalization holding forte at around $2.83 trillion at the time of writing. The flagship cryptocurrency opened trading at $88,197 at the start of the week and was trading at around $88,446 at the time of writing. Commenting on the apparent resilience of Bitcoin, Bitfinex analysts said during a regular market update:
“Amid one of the most turbulent periods for global markets in years, Bitcoin is showing impressive resilience.”
Conclusion
US President Donald Trump has feuded with not only Jerome Powell but also the Federal Reserve for years, blaming Jerome Powell for always being too late on rate cuts, even during his first term as President. This time around, Trump is threatening to replace Powell by having him terminated from office and stating that it “cannot come fast enough.” The current high interest rate environment and lingering tariffs could leave Bitcoin stretching its consolidation into the next few weeks.
Frequently Asked Questions (FAQs)
What is the relationship between interest rates and Bitcoin?
Experts believe that Bitcoin’s prices will likely increase anytime the Fed lowers interest rates and may fall when the Fed raises rates.
How do high interest rates affect the crypto market?
Businesses tend to grow since consumers and investors chase higher yields in riskier assets. The surge in liquidity could also raise the prices of cryptocurrencies.
What drives the Bitcoin price?
The price of Bitcoin is mainly determined by supply and demand, just like the value of the US dollar. Like regular currency, the cost of Bitcoin increases when the demand for it increases, and vice versa.
Appendix: Glossary of Key Terms
Market capitalization: Market capitalization (or market cap) is the total value of all the cryptocurrencies mined or created.
Liquidity: The ease and speed with which a coin can be converted into cash or other coins without substantially moving its price up or down
FED: The Fed, or “Federal Reserve,” is the central bank of the United States.
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