Trump Legal Threats Spur Rate Cut Speculation Boosting Crypto Gains

Trump’s escalating legal threats against Federal Reserve Chair Jerome Powell have intensified speculation that the Fed may be pressured to lower interest rates in the latter half of 2025. The has warned of pursuing a lawsuit over what he described as excessive renovation costs and monetary policy decisions at the Fed’s Washington headquarters. These remarks have added a layer of political uncertainty to the central bank’s policy trajectory and reignited market expectations for rate cuts [1]. Powell and Fed officials have defended the renovation expenses, but the dispute highlights the growing friction between Trump and the central bank.

Analysts suggest that if the Fed were to ease policy, it could provide a significant tailwind for risk assets, particularly cryptocurrencies. The anticipation of lower borrowing costs has already led to a surge in investor appetite for high-risk assets. Bitcoin rose 0.74% in the last 24 hours and gained 5.34% over the past week, reaching $119,775.08. Ethereum outperformed the market, climbing 6.30% in the same period to $4,513.84, extending its weekly rally to 26.31% [2]. XRP also saw gains, with a 3.83% rise in 24 hours to $3.27. The market’s Fear & Greed Index hit 69, indicating strong optimism and a shift toward speculative positioning.

The potential for rate cuts has driven increased capital rotation into alternative assets, including altcoins. Bitcoin’s dominance fell 1.42% to 58.99%, signaling stronger inflows into smaller cryptocurrencies. Open interest in crypto derivatives climbed 3.72% to $203.37 billion, reflecting heightened speculative activity. Meanwhile, gold futures edged up 0.15% to $3,347.97, and the U.S. dollar index declined 0.44% to 97.927, suggesting capital is moving toward higher-risk and alternative assets [3].

The market reaction has been further fueled by Trump’s recent executive order allowing 401(k) accounts to include cryptocurrencies and private assets. While framed as a move to expand financial freedom for savers, the inclusion of high-risk assets in retirement plans has raised concerns among critics about the volatility such investments could introduce. Analysts view this as a strategic move to normalize digital assets and enhance their legitimacy in capital markets [4].

The combination of political pressure on the Fed and regulatory developments has created a favorable environment for crypto markets. If the central bank confirms a path of rate cuts, as many traders now expect in September, October, and December, cryptocurrencies could see further price appreciation, especially in high-beta assets like Ethereum and altcoins [5]. The market is closely watching how the interplay between political intervention and monetary policy unfolds, as it could shape the broader economic landscape in the months ahead.

Sources:

[1] title1: Trump threatens Fed chair Powell with 'major lawsuit'

url1: https://www.cnbc.com/2025/08/12/trump-fed-powell-lawsuit-washington-building.html

[2] title2: US President Trump slams Powell, threatens lawsuit

url2: https://www.mitrade.com/insights/news/live-news/article-4-1033189-20250812

[3] title3: Trump Threatens Legal Action Against Powell Over Fed

url3: https://www.ainvest.com/news/trump-threatens-legal-action-powell-fed-spending-rate-policy-2508/

[4] title4: Trump's 401(k) order offers retirement savers crypto, private assets, but also higher fees and more risk

url4: https://www.reuters.com/business/finance/trumps-401k-order-offers-retirement-savers-crypto-private-assets-also-higher-2025-08-10/

[5] title5: Crypto market hits record high after Trump order

url5: https://www.aol.com/crypto-market-hits-record-high-142633177.html