Late this week, Wall Street Journal sources reported that in recent months, the US president has repeatedly talked about the prospect of firing Fed Chairman Jerome Powell. Donald Trump has no such powers, but he certainly can and knows how to exert pressure.
Powell’s possible dismissal will be a serious event for financial markets, including cryptocurrencies. Analysts tried to imagine how the situation would develop in such a scenario.
Why Trump is putting pressure on the US Federal Reserve
US President Donald Trump has been openly expressing his dissatisfaction with the actions of the Federal Reserve over the past few weeks. According to him, Jerome Powell is slow to lower the benchmark interest rate, which would reduce the pressure on the economy.
Trump attributes the need for this to lower prices and inflation in general, the indicators of which are really sagging. At the same time, Powell clearly does not want to follow the lead of politicians and emphatically makes independent decisions.
Although some market participants assume that the Fed does not want to help Trump to improve the situation in the economy after he imposed huge duties on imports to the US.
According to experts, Powell’s dismissal will definitely lead to the collapse of traditional assets for example bonds, as well as the dollar. At the same time, interest in Bitcoin and other popular cryptocurrencies due to their independence from the banking system will surely grow.
There is no precedent in U.S. history for firing the Fed chairman at the will of the president, as the central bank has been functionally independent since 1951. However, Trump may try to achieve such an outcome, as indicated by his recent remarks. For example, the president said Thursday that firing Powell “can’t happen fast enough.”
What will happen to the financial markets if Trump goes for it? According to experts, the consequences would be literally devastating.
Here is a comment from Juan Leon, a senior investment strategist at the Bitwise fund:
This would set a really dangerous precedent – executive branch interference with the agency that controls the nation’s money supply. But, as I see it, it would be very positive for Bitcoin.
According to the expert’s version, such a move by Trump will undermine investor confidence in the fundamentals of the U.S. economy, as the actions of the U.S. Federal Reserve will definitely not be perceived as independent.
However, this will also be a reason for Bitcoin’s growth. Recall, the issue of cryptocurrency is fixed and in addition decreases by 50 percent every 210 thousand blocks or approximately four years. To influence this, bankers and politicians certainly can not. The expert continues.
Alternative means of saving, not subject to government intervention, would become even more attractive.
As an example of this scenario, the Bitwise representative recalled what was happening with gold the day before. However, after the announcement of Trump’s new tariffs on imports from many countries, the precious metal received an influx of funds and set a historic high rate.
Well, Bitcoin has historically shown serious growth for 100-150 days after gold records.
Gold’s rise in the current market environment is a bullish signal for Bitcoin, indicating its possible trajectory once the macroeconomic dust settles.
Matthew Siegel, head of digital asset research at VanEck, also believes that Powell’s firing will undermine confidence in the U.S. market. Moreover, this dynamic is more characteristic of emerging markets than of an economy with a global reserve currency.
His quote was as follows.
If markets start pricing in a political change in Fed leadership every four years, Bitcoin’s fixed and non-political monetary policy may seem much more attractive against that backdrop.
Analysts admit that Bitcoin will not be able to avoid a collapse in the event of Powell’s dismissal, as cryptocurrencies have recently been characterized by a high correlation with the stock market. However, Juan Leon from Bitwise considers this prospect to be short-term, meaning BTC could change its own trajectory rather quickly.
What will happen to cryptocurrency after Powell’s resignation
Trump’s statements did not pass by the Democrats, who continue to work for the deterioration of the reputation of the US President. For example, US Senator Elizabeth Warren, who is known for her dislike of cryptocurrencies and active fight against them, said that the firing of the Fed chairman will provoke a financial collapse.
Still, investor confidence in the integrity of the U.S. capital markets would be undermined. Warren also reminded that the president has no legal authority to fire Powell.
If Chairman Powell can be fired by the President of the United States, it will crash the markets. The infrastructure that keeps this stock market strong and, therefore, a big part of our economy strong, and a big part of the world economy strong, is the idea that the big pieces move independently of politics.
If interest rates in the United States are subject to a president who just wants to wave his magic wand, this doesn’t distinguish us from any other two-bit dictatorship, Elizabeth Warren stated.
Experts agree that in the long run, firing the Fed chief will remind investors of the benefits of large cryptocurrencies like Bitcoin. And if that doesn’t happen, Jerome Powell will move to lower the benchmark interest rate sooner or later anyway. That’s good for the crypto market, too.
Source: https://coinpaper.com/8629/trump-s-fed-pressure-campaign-market-chaos-risks-and-bitcoin-s-opportunity