Trump advisers call on Powell to step down. Can Bitcoin benefit?

Trump economic advisers call on Powell to leave the Fed, sparking new debate on policy direction

Kevin Hassett, U.S. President Donald Trump's chief economic adviser, has called on former Federal Reserve Chairman Jerome Powell to leave the Central Bank's board, marking the beginning of another round of debate over the Fed's policy direction weeks after officials raised interest rates for the first time in more than three years.

Internal report sparks management controversy

According to Bloomberg, National Economic Council Director Kevin Hasssett said on Fox News "Sunday Morning Futures" that in view of a report released by the internal audit watchdog that pointed out management issues related to the renovation of the Federal Reserve's Washington headquarters, Powell should "find another job." Asked whether Powell should resign, Hassett said: "I think he should move forward and respect the independence of the Fed."

The report intensified pressure on President Trump, who had previously individually asked Powell to "be forced to resign as a board member." During Powell's tenure, Trump repeatedly pushed the central bank to reduce borrowing costs.

The impact of Powell's stay on Bitcoin depends on his successor

Powell's position is crucial for Bitcoin because although he was replaced as chairman of the Federal Reserve in May by Kevin Warsh, he remains a voting member of the Federal Open Market Committee (FOMC). If Powell leaves, it will create a vacancy in the seven-member council that Trump can nominate to fill, but this will require Senate confirmation.

Any impact on Bitcoin will largely depend on whether Powell's eventual successor changes market expectations about the direction of interest rates, not just his departure itself. Currently, the market has cut expectations for another interest rate hike in October due to weak employment data in September, but further interest rates are still possible later in the year.

Despite pressure from high U.S. Treasury yields, Bitcoin recovered after the Federal Reserve raised interest rates in September, thanks to the re-inflow of spot ETF funds.

Monetary policy voting rights and personnel changes

Powell remained on the Board of Governors after stepping down as chairman in May, breaking with the usual practice of former Federal Reserve chairmen leaving the central bank after handing over leadership. His continued existence means he retains a vote on monetary policy. The Federal Reserve currently lists him as one of the 12 voting members of the FOMC, alongside Walsh and other governors and regional Fed chairmen.

If Powell resigns before the end of his term, Trump will be eligible to nominate a successor to serve the remainder of his term. A nominee must be confirmed by the Senate before he can formally take his seat.

The personnel issue emerged less than three weeks ago, when the FOMC unanimously decided on September 16 to raise the federal funds target range by 25 basis points to 3.75% to 4%. Hassett told Fox News that he disagreed with the decision, but respected Washi's decision for what he believed was the right reasons.

Market Reaction and Macro Environment

Around the September meeting, Bitcoin prices were under pressure and then rebounded. Previous data showed that BTC climbed above $87,000 after raising interest rates, thanks to the return of demand for spot Bitcoin ETFs and another source of buying from corporate purchases. The U.S. spot Bitcoin ETF lost $746.3 million between September 15 and 16, but recorded a net inflow of approximately $2.65 billion in the following five trading days (ending September 23). Strategy purchased an additional 950 bitcoins worth $75.7 million between September 14 and 20.

However, Bitcoin's recovery has not eliminated interest rate risk. Tim Sun, a senior researcher at the HashKey Group, pointed out that the second rate hike is a greater threat to Bitcoin rather than a delay in the CLARITY Act. Factors he focuses on include Treasury yields, ETF flows and derivative leverage.

Since then, interest rate expectations have moved in favor of Bitcoin, and the membership of the Federal Reserve has not changed. Federal Reserve Vice Chairman Philip Jefferson said last week that policymakers may need more time to decide on their next interest rate action, while New York Fed Chairman John Williams said that while there is no need to rush to raise interest rates, further rate increases may still be needed.

The market subsequently lowered its expectations for an October rate hike. As of October 5, the probability of another rate hike this month dropped to about 18%, while traders are still betting that a rate hike in December is more likely. Bitcoin responded to this milder October outlook. After September's non-farm payrolls increased by only 29,000, well below forecasts, BTC briefly broke through US$87,000 on October 2, reinforcing policymakers 'expectations of suspending interest rate hikes at their October 27 - 28 meeting.

The cryptocurrency traded at close to US$86,000 over the weekend, compared with around US$83,600 at the close on September 30. Price movements this year have repeatedly shown that Bitcoin will respond to changes in the expected path of the Federal Reserve's policy. For example, BTC climbed above $65,000 in July after weakening producer inflation lowered expectations for another rate hike; and Washi's more hawkish signals had previously put pressure on cryptocurrencies.

Treasury yields remain an obstacle to Bitcoin

如果美联储的前景更加鸽派，可能会通过压低国债收益率和降低生息资产的回报率来帮助比特币，但债券市场尚未完全跟随10月加息预期的下降。进入新的一周，美国国债收益率依然高企，尽管9月份的就业报告疲软，美元却走强。

长期收益率尤为顽固。10年期国债收益率近期升至5.3%以上，即使投资者对美联储10月再次加息的信心减弱，金融状况依然紧张。高收益率一直是比特币面临的主要宏观压力之一。投资者可以通过政府债务获得更高的回报，而无需承担与加密货币相关的波动性，而上升的收益率可能会收紧整个风险资产类别的金融条件。

尽管如此，比特币的需求在一定程度上抵消了这种压力。9月加息后的复苏伴随着ETF资金的回流，表明美联储紧缩与比特币之间的关系并非单向的。此前的分析已将机构需求确定为可能缓解传统上高利率对加密货币施加压力的一个因素，即使更紧的货币政策继续提高持有风险资产的成本。

The next immediate test will come from the Federal Reserve's October meeting. Weak job growth in September reduced the reason for another move this month, but inflation remained above target and markets still expected a possible rate hike before the end of the year. At the same time, Powell said threats of criminal investigation against him and the Fed left him with no choice but to remain on the board. The Justice Department said on Friday that it would not reopen a criminal investigation based on the Federal Reserve's inspector general's findings. The Inspector General found no evidence of criminal misconduct or administrative irregularities related to the $2.4 billion headquarters renovation project, but pointed to management flaws that led to significant overruns on the project. Attorney General Todd Blanche said an independent audit could still lead to an investigation if it found evidence of criminal activity, while the Fed said external auditors would review renovation costs.