Trump-Powell Conflict Fuels Volatility While Retail Sells Bitcoin At A Loss

Tensions between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell have escalated, triggering volatility in financial markets. Powell revealed the Department of Justice had served the Fed with grand jury subpoenas, hinting at potential criminal charges over his testimony on the Fed building renovation project according to reports. He described the move as an attempt to exert political pressure on the Fed's monetary policy decisions.

Bitcoin (BTC) responded to the news with a 1% rise, trading above $90,000, while U.S. stock index futures and the dollar declined according to market data. The cryptocurrency remained under pressure from sell-side activity, with cumulative volume delta metrics showing increased selling in both spot and derivatives markets as reported.

Powell denied the accusations of wrongdoing, stressing that no one — not even the Fed chair — is above the law. He added that the investigation reflects broader pressures on the central bank to lower interest rates. Trump, however, denied any involvement and criticized Powell's performance as chair.

What Sparked the Tension?

The Trump administration has long sought to exert greater influence on the Fed's policy decisions. Last summer, Trump scrutinized the Fed's building renovation costs and even visited the central bank to confront Powell in person. The latest development — the criminal investigation — was triggered by Powell's testimony on the project before the Senate Banking Committee.

The Fed chair argued that the investigation is a pretext for pressuring the central bank to adopt a more dovish stance on interest rates. He emphasized the importance of maintaining the Fed's independence in setting monetary policy.

How Did the Markets React?

Bitcoin reacted positively to the news, rising above $90,000, but remained under pressure from selling activity. The broader cryptocurrency market showed mixed performance. Ethereum (ETH) and Ripple (XRP) fluctuated, with XRP declining over 1% amid increased profit-taking.

Investor sentiment turned cautious as the Fed rate-cut hopes faded in early 2026. Crypto exchange-traded products (ETPs) posted $454 million in outflows last week, with Bitcoin-driven outflows at $405 million. Ether (ETH) funds also saw $116 million in outflows during the same period.

Institutional investors continued to accumulate Bitcoin, with Strategy Inc. purchasing $1.25 billion worth of the cryptocurrency in early January. The company's Bitcoin holdings now total nearly 687,410 BTC, valued at $51.8 billion.

What Are Analysts Watching Next?

Analysts are closely monitoring the potential impact of a Trump-led effort to replace Powell as Fed Chair. With Powell's term ending on May 15, a decision on his successor will be made in the coming months. A more dovish Fed could boost Bitcoin and other cryptocurrencies, while a hawkish shift could increase selling pressure.

On the technical side, Bitcoin is trading within a consolidation range around $90,000, with key support at $90,432 and resistance at $90,907. The RSI remains neutral at 52.58, indicating no immediate overbought or oversold conditions.

Investors are also watching for further developments in the Trump-Powell dispute, which could have broader implications for financial markets. The outcome could influence Fed policy decisions and investor sentiment in the coming months.