Reasons the Jerome Powell Inquiry Might Harm Bitcoin

Unexpectedly late on Sunday evening, Federal Reserve Chairman Jerome Powell issued a statement confirming that he is currently under criminal investigation by the U.S. Justice Department.

He is accused of providing misleading information to Congress regarding the ongoing renovation efforts at the central bank’s headquarters in Washington DC, which also includes actions to eliminate asbestos.

This project has placed Powell in direct conflict with Donald Trump, as both individuals were involved in a notable and somewhat cordial on-camera exchange last summer.

In his latest statement, Powell has taken a strong stance, labeling the recent actions of the Trump administration as “unprecedented.” Furthermore, he contended that this investigation is largely unrelated to the renovations.

“The threat of criminal charges is a result of the Federal Reserve determining interest rates based on our best evaluation of what benefits the public, instead of adhering to the desires of the president.”

Indeed, Trump has been highly critical of the Federal Reserve’s prudence in terms of reducing borrowing costs, frequently referring to its chairman as “Too Late” Jerome Powell.

With only a few months remaining until Powell’s term concludes, it is highly probable that the president will nominate a successor more aligned with his preferences—a decision that could significantly affect the markets.

At present, Trump asserts that he has not instigated this legal action, informing NBC News:

“I don’t know anything about it, but he’s certainly not very effective at the Fed, and he’s not very adept at constructing buildings.”

Nevertheless, the events from the weekend could have a major effect on Wall Street, the dollar, and Bitcoin as investors process the news. As CNN business anchor Richard Quest remarked on X:

“Powell had no choice but to confront the president. This was a direct assault on Fed independence…. I have no idea how the markets will respond, but we have entered a very perilous period where it seems nothing is off-limits.”

Even Republican lawmakers have voiced concerns regarding this investigation, including a prominent member of the Senate Banking Committee. Thom Tillis stated that there is now clear evidence the White House is attempting to undermine the Fed’s independence, pledging to resist.

“I will oppose the confirmation of any nominee for the Fed — including the forthcoming Fed Chair vacancy — until this legal issue is completely resolved.”

Tillis received support in his criticism from Elizabeth Warren, a Democratic senator who has been an outspoken opponent of the crypto industry. She accused Trump of attempting to orchestrate a “corrupt takeover of our central bank,” adding:

“He is misusing the law like a wannabe dictator so the Fed serves him and his billionaire associates. The Senate must not advance ANY Trump Fed nominee.”

The independence of a central bank is crucial. Without it, politicians can apply undue pressure and demand unsustainably low interest rates that ultimately worsen inflation over time. This leads to higher levels of economic instability. Nations with central banks lacking independence include Venezuela, Zimbabwe, and Turkey—all of which have experienced hyperinflation in the past.

However, some argue that the Federal Reserve is susceptible to errors—and because policymakers are not directly elected by the populace, there exists a deficit of democratic legitimacy.

Bitcoin (BTC)24h7d30d1yAll time

The events of this weekend could be significant for Bitcoin. The largest cryptocurrency typically flourishes in low interest rate conditions as it makes riskier assets more appealing. With Trump likely to appoint loyalist Kevin Hassett as Powell’s successor, aggressive rate cuts may be anticipated in the latter half of 2025.

Nevertheless, the investigation Powell is currently facing could cast doubt on any confirmation, with lawmakers from both parties in Congress working to block his appointment in retaliation.

Monitor the markets closely this week. Dow, S&P 500, and tech-heavy Nasdaq 100 futures all experienced declines prior to the market opening on Monday, with the dollar decreasing and gold reaching a record high. Freedom Capital Markets’ chief strategist Jay Woods was quoted by CNBC stating:

“The market has encountered this before and does not respond favorably. It’s not about Powell at this point, it’s about the independence of the Fed. Thus, when such news emerges, the immediate reaction is to sell off.”

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