Powell Faces Pressure as Bitcoin Drops 23% Amid Rate Cut Speculation

Federal Reserve Chair Jerome Powell is scheduled to testify before Congress and the Senate, with markets anxiously awaiting his remarks. The crypto markets have been particularly volatile, with Bitcoin crashing to $98.5K, reflecting the uncertainty surrounding interest rate decisions. President Donald Trump has been vocal in his criticism of Powell, urging for deeper rate cuts of 2–3% and accusing the Fed of making a mistake by holding rates steady at 4.25%–4.5% in June.

Powell is under intense pressure from both sides of the political spectrum. Senator Elizabeth Warren, along with Fed Governors Michelle Bowman and Christopher Waller, have also called for earlier rate cuts, possibly as soon as July. The odds of a July cut stand at 23%, while chances for a September cut are much higher at 82%, according to analysts' forecasts. Powell’s testimony is expected to address the reasons behind the Fed’s cautious stance despite growing demands for rate cuts.

The crypto market is currently in a state of turmoil. Bitcoin has dropped to a multi-month low, and altcoins are deep in the red. Much of this volatility can be attributed to fears surrounding proposed trade tariffs, which have added more uncertainty to an already fragile economy. Powell is expected to discuss how these tariffs might impact the Fed’s decisions. If he leans toward easing rates, crypto prices could potentially rebound. However, if he maintains a cautious tone, the U.S. dollar could strengthen, which usually means more pain for digital assets.

Geopolitical tensions, particularly recent U.S. airstrikes in Iran, have pushed oil and gold prices higher, raising fresh concerns about inflation. The ongoing conflict between Israel and Iran is also increasing the risk of a potential closure of the Strait of Hormuz, a key global shipping route. If this happens, fuel prices could skyrocket, making it harder for the Fed to meet its inflation goals. Powell’s comments on these risks will be closely watched, as they could shape expectations for interest rate policy through the rest of 2025.

Powell’s upcoming remarks could be a turning point for the markets. Investors are eager to know whether he will signal relief with rate cuts or continue to play it safe. Whatever he says, the outcome is likely to shape the market’s direction for months to come, especially in crypto. The markets are also concerned about the potential for political interference in the Fed's decision-making process. When Trump threatened to fire Powell earlier this year, markets reacted negatively, with investors warning of a severe drop in asset prices if the president went ahead with his threat. Trump quickly backtracked, stating that Powell would serve out his term, which ends in 2026. However, the incident highlighted the importance of the Fed's independence in maintaining market stability.