Dovish Fed Could Push Bitcoin to $200K—and Threaten U.S. Stability

Trump’s potential selection of a dovish Federal Reserve chair has sparked speculation that Bitcoin could surge to $200,000, according to Galaxy Digital CEO Mike Novogratz. The prediction hinges on the Federal Reserve adopting aggressive rate-cutting policies under a Trump-appointed leader, which Novogratz argues could trigger a "blow-off top" in crypto markets. "If the Fed cuts rates when they shouldn’t, and you put in a massive dove, you get a scenario where gold and Bitcoin skyrocket," he stated in an interview. The Fed’s dovish shift, Novogratz warned, could undermine the central bank’s independence and destabilize the U.S. dollar, though he acknowledged the economic risks of such a move.

Trump’s reported list of potential Fed chair candidates includes Kevin Hassett, Christopher Waller, and Kevin Warsh, all of whom are seen as likely to support dovish monetary policies. The Fed’s current chair, Jerome Powell, is set to step down in May 2025, creating a critical juncture for market expectations. Analysts note that Trump’s pressure on the Fed to cut rates has already influenced market sentiment, with Bitcoin ETF inflows surging to $15 billion since mid-April. This trend has fueled bullish positioning, with traders increasingly buying call options at $130,000 strike prices, reflecting confidence in further price appreciation.

The dovish pivot is expected to benefit not only Bitcoin but also gold, which Novogratz predicts could reach $10,000. However, he emphasized that such a scenario would likely come at the expense of U.S. financial stability. "That would be really bad for America," he cautioned, highlighting concerns about inflationary pressures and the erosion of the Fed’s institutional credibility. The U.S. dollar, already under pressure from recent rate-cut expectations, could face additional headwinds if the Fed adopts an overly accommodative stance.

Market participants are closely watching for regulatory developments that could influence Bitcoin’s trajectory. The introduction of spot Bitcoin ETFs and legislative efforts like the Genius Act and market structure bill are seen as catalysts for broader institutional adoption. Novogratz noted that "the herd" of institutional investors has finally entered the crypto space, with BlackRock and other major players driving demand. These developments, combined with a potential Fed shift, create a "perfect setup" for a speculative rally.

While the $200,000 target is framed as a plausible outcome, Novogratz urged caution. He advised traders to avoid excessive leverage and emphasized the importance of hedging strategies, such as purchasing out-of-the-money put options. The current Bitcoin price, trading around $109,500, remains below its recent all-time high of $123,091, but on-chain metrics like taker buy volume and futures open interest suggest sustained bullish momentum. Analysts like Rekt Capital and Ali Martinez have also projected price targets of $126,000 and $133,000, respectively, ahead of potential macroeconomic catalysts in October.

The interplay between political and monetary policy remains a key driver of Bitcoin’s volatility. Trump’s influence on the Fed’s direction underscores the interconnectedness of U.S. financial markets and crypto assets. As the election cycle intensifies, the Fed’s response to political pressures—and the subsequent impact on monetary policy—will be critical in determining Bitcoin’s next phase. For now, the market appears to be pricing in a dovish outcome, with traders positioning for a continuation of the bull run, albeit with heightened awareness of the risks involved.