Bessent vs Powell: Crypto's Rate Cut Hopes Hang in Balance

US Treasury Secretary Scott Bessent has expressed his determination to lower interest rates, but may face resistance from Federal Reserve Chair Jerome Powell. Bessent, appointed by President Trump, has been vocal about his intention to bring down interest rates, which he believes have been too high for the bottom 50% of Americans. However, Powell has opposed rate cuts and may be a significant obstacle to Bessent's plans.

Lowered interest rates typically have a bullish effect on risk-on assets, including cryptocurrencies. Last September, the Federal Reserve cut rates by 50 basis points, which proved bullish for the crypto market. However, Powell has indicated that slower rate cuts will be the agenda for the foreseeable future. Despite this, rumors of further rate cuts fueled higher price gains in the crypto market.

In addition to potential rate cuts, the US-China trade war may also impact the crypto market. US-China tariffs have created uncertainty, which could lead to a liquidity squeeze in the crypto market. In the last 24 hours, over 300,000 traders were liquidated, indicating a highly speculative phase in the market. When Trump proposed tariffs last month, it caused a spike in using Bitcoin as an inflation hedge. However, it remains to be seen whether this factor will ease pressure on the crypto market.

Bessent's plans to lower interest rates may face additional challenges from the US-China trade war. The Trump administration's Crypto Reserve policy has already struggled with Congressional pushback, and the government may not be prepared to wage a committed fight over this issue. Moreover, a recession may be looming, which could further complicate Bessent's efforts to lower interest rates.

Regardless of the economic policy Trump or Bessent wish to pass, the Federal Reserve ultimately determines interest rates. Powell has preemptively claimed that he would resist any attempt to eject him from office before his term ends. Acting harshly may push him away from pro-crypto policies at a time when extreme fear rules the market.