Bitcoin investors have yet to factor in a potentially more dovish Federal Reserve, which will depend on who US President Donald Trump nominates to replace Chair Jerome Powell, economist Alex Krüger said.
Bitcoin (BTC $114,861) traders see the Fed’s first potential rate cut this year, expected in September, as creating a more bullish environment for Bitcoin. The right Fed chair nominee could push the price even further.
Markets eye September rate cuts
“I have a high degree of confidence this cycle is not over because I am expecting changes in the Fed to bring on considerably more dovish monetary policy,” Krüger said in an X post on Monday.
“This would start to get priced in once Trump announces his nominee to replace Powell,” he said. Powell’s term expires in May 2026, and Trump has already begun putting forward names as potential candidates to replace him.
The Fed affects Bitcoin through its monetary policy, which influences interest rates, overall market sentiment and whether investors are willing to take risks or play it safe.
After climbing to a new all-time high of $124,128 on Wednesday, Bitcoin has pulled back 6% to about $115,150. Source: CoinMarketCap.
According to a CNBC report on Wednesday, the Trump administration is considering 11 candidates to replace Powell.
The latest names added to the list include Jefferies’ chief market strategist David Zervos, BlackRock’s global fixed income chief investment officer Rick Rieder and former Fed Governor Larry Lindsey.
Other reports suggest Trump has narrowed the list to three or four candidates and may announce a replacement sooner than expected.
Trump’s relationship with Powell has been strained since his inauguration in January, with the president repeatedly criticizing the Fed’s reluctance to cut rates and publicly calling out Powell.
Trump and Powell’s relationship has been tense
On April 17, Trump said, “Powell’s termination cannot come fast enough!” Meanwhile, Florida Senator Rick Scott agreed with the president, saying, “It’s time for new leadership at the Federal Reserve.”
Krüger said he believes the Fed will cut rates at its Sept. 17 meeting.
The view is widely shared by the market, with 83.9% of participants anticipating a rate cut, according to the CME FedWatch Tool.
On Friday, Coinbase Institutional’s global head of research, David Duong, said there was “significant retail capital sitting on the sidelines” in money market funds, and the Fed’s easing could “unlock greater retail participation in the medium term.”