Economist Alex Krüger notes that Bitcoin investors haven’t yet accounted for the possibility of a more dovish Federal Reserve, which hinges on who U.S. President Donald Trump selects to succeed Jerome Powell.
Traders anticipate the Fed’s first rate cut of the year in September, viewing it as a bullish signal for Bitcoin. A favorable Fed chair pick could drive prices even higher.
Markets brace for potential rate cuts in September
“I’m highly confident this cycle isn’t over, as I expect changes at the Fed to usher in significantly more dovish monetary policy,” Krüger said in a post on X on Monday.
He added, “This effect will start to be priced in once Trump announces his nominee to replace Powell.” Powell’s term runs through May 2026, and Trump has already started suggesting potential replacements.
The Fed impacts Bitcoin primarily through its monetary policy, shaping interest rates, overall market sentiment, and investors’ willingness to take on risk.
A CNBC report on Wednesday indicates that the Trump administration is weighing 11 candidates to succeed Powell.
The newest names on the list include Jefferies’ chief market strategist David Zervos, BlackRock’s global fixed income CIO Rick Rieder, and former Fed governor Larry Lindsey.
Other reports suggest Trump has already narrowed the field to three or four finalists and may announce a replacement sooner than anticipated.
Trump’s relationship with Powell has been tense since his inauguration in January, with the president repeatedly criticizing the Fed’s hesitancy to cut rates and publicly singling out Powell.
Trump and Powell have had a strained relationship.
On April 17, Trump declared, “Powell’s termination cannot come fast enough!” Florida Senator Rick Scott echoed the sentiment, saying, “It’s time for new leadership at the Federal Reserve.”
Krüger expects the Fed to cut rates at its September 17 meeting. This view is widely shared, with 83.9% of market participants predicting a rate cut, according to the CME FedWatch Tool.
On Friday, David Duong, global head of research at Coinbase Institutional, noted that “significant retail capital” is currently parked in money market funds, and Fed easing could “unlock greater retail participation in the medium term.”
