1. Powell’s Focus on Inflation vs Calls for Lower Rates
Powell’s Goal:** As of May 2025, Powell says the main job of the Federal Reserve is to keep inflation under control. Recently, he has been cautious and not rushing to lower interest rates. The economy is still doing okay. The Fed is keeping rates steady because they worry that trade problems (like tariffs) could make prices go up and cause jobs to be lost.
Trump’s Pressure:** Trump has been telling the Fed to lower interest rates. He often criticizes Powell for not doing enough to help the economy with lower rates.
What might happen?**
Scenario 1: Powell stays firm
If Powell keeps rates the same and focuses on stopping inflation, the crypto market might stay quiet or even go down. When interest rates are high or steady, people prefer safer investments. This could make risky assets like Bitcoin less popular.
Scenario 2: Powell lowers rates
If Powell decides to lower interest rates, maybe because of political pressure or new economic data, cryptocurrencies could become more attractive. Lower rates make borrowing cheaper, so more people might buy cryptocurrencies. Prices could go up.
2. Tariffs and Economic Uncertainty
Powell’s Warnings:** Powell says tariffs (trade taxes) can cause prices to rise and hurt the economy. This affects all markets, including crypto.
Trump’s Trade Policies:** Tariffs can cause markets to shake. When tariffs are announced, stocks and sometimes cryptocurrencies often fall.
What might happen?**
The ongoing trade issues and worries about inflation can make markets very unstable. As the next election approaches on July 28, cryptocurrencies might see big price swings. Investors remember that markets often fall after political or economic surprises.
3. Trust in the Federal Reserve (Novick’s Ideas)
Concerns:** Some political leaders criticize the Fed too much. People worry that the Fed might not be fully independent and could be influenced by politics. Usually, markets prefer the Fed to make decisions based on facts, not politics.
What might happen?**
If politicians interfere more, people might lose trust in the U.S. markets. Some might move their money into assets like Bitcoin, which is seen as not controlled by any government. But, increased worries could also make investors more cautious, hurting cryptocurrencies.
Current situation:**
Powell is being careful, waiting to see how the economy and inflation change before lowering interest rates. This cautious attitude might slow down the growth of cryptocurrencies for now.
Overall:
Calls for lower rates and trade problems create uncertainty. This can make markets, including cryptocurrencies, more volatile. The actions and words of the Fed and politicians are very important because they influence how much investors want to risk.
To be ready, watch what the Fed, politicians, and the economy do and say.