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Bitcoin (BTC) is hovering just below $85,000, caught in a holding pattern as tensions escalate between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell. The cryptocurrency market, already rattled by global trade uncertainties, faces fresh volatility following Trump’s reported discussions about ousting Powell, raising concerns over central bank independence and economic stability. This clash comes as the U.S. grapples with stagflation fears, fueled by a sharp drop in the Philadelphia Fed manufacturing index and rising prices amid Trump’s tariff policies.
Powell’s recent hawkish remarks have added to the market’s unease. Criticizing Trump’s tariffs as likely to slow growth while driving up prices—a scenario economists term “stagflation”—Powell signaled a focus on controlling inflation, hinting at tighter monetary policy. This stance has dampened hopes for near-term rate cuts, with markets now pricing in a more cautious Fed approach. Bitcoin, often viewed as a risk asset, dipped alongside stocks after Powell’s comments, though gains in altcoins like BCH, NEAR, and AAVE kept the broader CoinDesk 20 Index buoyant.
Trump’s private talks about replacing Powell with former Fed Governor Kevin Warsh, coupled with warnings from Treasury Secretary Scott Bessent about market instability, have heightened uncertainty. The odds of Trump removing Powell this year have climbed to 19% on the blockchain-based prediction market Polymarket, the highest since January. Meanwhile, bitcoin options traders are hedging bets, chasing bullish targets between $90,000 and $100,000 while seeking protection against near-term declines, according to Deribit data.
The broader economic context adds complexity. Trump’s tariffs, which have sparked fears of a U.S. recession, are seen as dovish by some analysts, potentially forcing the Fed to cut rates if growth falters significantly. However, Powell’s current focus on inflation suggests no immediate pivot. As markets digest these dynamics, bitcoin’s price action remains subdued, reflecting investor caution amid geopolitical and monetary policy turbulence. With Trump’s trade policies and Fed decisions hanging in the balance, the crypto market braces for a bumpy ride.
