Trump-Powell Clash Shakes Crypto: Leak, Denial, and Market Jitters

Trump Denies Plans to Fire Jerome Powell: Will Crypto Markets Boom or Bust?

The buzz around whether President Donald Trump plans to fire Federal Reserve Chair Jerome Powell is more than just political chatter—it is a potential shockwave across financial markets, particularly the already-volatile cryptocurrency space. As rumors spread and retractions follow, investors are left asking: If Trump actually removes Powell, will crypto markets rally, or will it trigger a devastating crash?

Rumors That Trump Will Fire Powell Spark Market Turbulence

Reports initially circulated that President Trump had shown a draft letter to House Republicans indicating he was “likely” to proceed with removing Powell from his position as Chair of the Federal Reserve, requesting feedback from lawmakers on the move. The reports, first circulated in private briefings, immediately sent tremors through financial circles, raising concerns about the independence of the U.S. central bank.

Source: X

Markets reacted sharply, with bond yields experiencing volatility, the U.S. dollar seeing a quick dip, and risk assets, including cryptocurrencies, surging on speculation that a potential firing would force the Fed to adopt looser monetary policies to stabilize market confidence.

However, in a conflicting twist, The Kobeissi Letter reported on X (formerly Twitter) that these rumors were false, stating that “reports of Trump firing Powell are not true,” while also suggesting that Powell is under an unspecified investigation. The lack of clarity has only fueled further speculation, leaving traders and institutional investors grappling with uncertainty.

Can a U.S. President Fire the Fed Chair?

Under current law, the President cannot dismiss the Federal Reserve Chair simply over policy disagreements. Removal would require proving “cause,” such as misconduct or dereliction of duty—criteria unrelated to disputes over interest rate policy.

Source: X

Despite legal constraints, Trump has previously voiced frustrations over Powell’s refusal to lower interest rates aggressively, arguing that high rates are stifling economic growth and hurting American competitiveness. Reports indicate that Trump had canvassed opinions from several Republican lawmakers about the potential removal of Powell, with some reportedly supporting the idea.

This backdrop of political pressure and rumor-fueled volatility has amplified market uncertainty, with analysts warning that such discussions, even if they do not materialize, could undermine confidence in the Federal Reserve’s independence.

Crypto Market Surges in Response—But For How Long?

The crypto market, always sensitive to macroeconomic shifts, responded immediately to the rumors. According to data from CoinMarketCap:

• Bitcoin (BTC) rose 2%, trading around $119,000, nearing its previous resistance levels.

• Ethereum (ETH) surged 9%, reaching $3,292.54 amid increased trading volumes.

• XRP climbed 3%, approaching $2.99 as traders rotated capital into altcoins.

This upward movement reflects the market’s interpretation that Powell’s removal could force the Fed to loosen monetary policy to stabilize markets, a scenario seen as bullish for risk-on assets like cryptocurrencies.

However, top analyst Brian Krassenstein issued a stark warning: “If Republicans want interest rates to rise, firing the Federal Reserve Chair is the way to get there. Confidence in the Fed and U.S. Treasuries would collapse, leading to higher, not lower rates.”

His assessment underscores a critical paradox: while immediate reactions may trigger a crypto rally, the longer-term implications could lead to a market crash if investor confidence in the U.S. monetary system erodes.

What Would Happen if Trump Did Fire Powell?

If Trump were to pursue Powell’s removal, it would represent a historic and unprecedented move. Such a decision could create:

• A confidence crisis: Investors may see the Federal Reserve as vulnerable to political interference, leading to capital flight from U.S. bonds and equities.

• Volatility in the dollar: A weakening dollar could temporarily boost crypto prices as investors hedge against currency devaluation.

• Rate hike pressure: Ironically, rather than leading to lower rates, a crisis of confidence could force yields higher as the government struggles to attract buyers for its debt, impacting liquidity across markets.

• Long-term damage to financial credibility: The independence of the Federal Reserve has been a cornerstone of U.S. economic stability, and undermining it could hurt the country’s position in global markets.

For the crypto industry, while Bitcoin and altcoins often rally on inflation fears and loose monetary policy, systemic instability could lead to a risk-off environment where even digital assets are sold off to raise liquidity during broader market panic.

What This Means for Crypto Investors Now

Despite the denial, the rumors have injected fresh volatility into crypto markets, coinciding with broader macroeconomic catalysts, including cooling U.S. inflation data and discussions around crypto regulation during Crypto Week.

Source: X

Analysts advise caution during such uncertain periods. The current crypto rally could quickly reverse if the rumors escalate into a real political battle, or if the Fed responds with defensive monetary measures to protect its credibility.

Moreover, with upcoming economic data releases and potential signals from the Federal Reserve about rate policies, crypto traders should prepare for sharp swings, focusing on technical levels and risk management rather than relying solely on speculative headlines.

The Bigger Picture: Crypto’s Long-Term Role Amid Political Uncertainty

The incident also highlights a broader trend: cryptocurrencies like Bitcoin are increasingly seen as hedges against monetary instability and political interference in central banking. If the Fed’s independence were ever genuinely compromised, it could accelerate interest in decentralized assets that operate outside government control.

However, crypto markets are not immune to broader liquidity shocks. If confidence in the U.S. economy falters, all risk assets, including cryptocurrencies, could face significant volatility.

Conclusion: Calm Before the Storm or a Buying Opportunity?

The current crypto surge, driven by rumors around Trump and Powell, may appear bullish in the short term. Still, it could mask deeper systemic risks if political tensions escalate.

While Trump’s team denies immediate plans to remove Powell, the mere discussion has shown how fragile market confidence can be, and how closely crypto markets are intertwined with traditional finance.

For investors, this moment calls for vigilance. Monitor macroeconomic indicators, Federal Reserve statements, and credible news sources to stay ahead. Diversification and disciplined risk management remain essential in navigating this uncertain landscape.

As crypto markets continue to react to every political headline and inflation print, traders must ask: Is this just another temporary rally, or the precursor to a larger shift in financial systems globally?

Either way, the crypto market is watching, waiting, and ready to react.

Writer @Ellena

Ellena is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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