Fed Chair Testifies Before Congress as Bitcoin Recovers $105K
On June 24, the Federal Reserve chairman Jerome Powell testified before the US Congress, facing questions about maintaining the current level of interest rates and the Fed’s refusal to lower them, following the example of the European Union.
The US president, Donald Trump, slammed Powell in a recent social media post, saying he hopes that
“Congress really works this very dumb, hardheaded person, over.”
While this is happening, the largest cryptocurrency, Bitcoin, which usually quickly reacts to any significant changes in the market or in the geopolitical field, rapidly increased by roughly 5%, topping the $106,000 mark for a moment, and then quickly rolling backwards.
Trump reproaches Fed Reserve chair Powell
Donald Trump has been heavily criticizing Powell this year, when the Fed Reserve chair for the first time announced at a FOMC meeting that interest rates would so far remain unchanged, while markets expected to see them go down. In April, Trump publicly called Powell a “major loser”, hinting that he would soon be able to replace him on the position of the Fed chairman.
Now, after Powell once again announced that there will be no rate cutting this time, the US president wrote on his social media Truth Social, about that, stressing that the Fed Reserve again refuses to lower the rates despite “no inflation, great economy” in the US. Trump pointed out that the EU has had ten rate cuts already, while the US has had none, while it has “800 billion dollars per year, plus.” The President believes that there is a much simpler solution than the one chosen by the Federal Reserve: “If things later change to the negative, increase the Rate.” But for now, he said, the US could bring the rates down by at least 2-3 basis points. As for the EU, Germany, France, and Italy have brought down their rates by nearly 2 basis points.
Furious, Trump added: “We will be paying for his incompetence for many years to come.” Now that the situation with international trade tariffs remains active, the Fed has withdrawn from changing the interest rate. The same reason stood behind this decision in late April. This is what Powell told Congress on June 24, responding to this tough question. He said that the Fed remains concerned about the effect these tariffs implemented by Trump would have on the economy in the long term, adding to that the current geopolitical risks.
However, one of Fed Reserve Board members, Michelle Bowman and Christopher Waller, stated that the rates are likely to be cut during the next meeting, which is scheduled for July. While the economy is indeed performing well, per Powell, and the inflation rate is close to the Fed’s target, he believes this could all disappear should rates be cut immediately.
Specifically for Bitcoin, lower interest rates mean a potential price increase, since it ensures that there is more cheap capital flowing into the market.
Fed is a sideshow vs. the Treasury Department, Arthur Hayes argues
However, there are some critics and sceptics of the Federal Reserve’s role in having any real influence on markets. One of the most vocal of them is Arthur Hayes, the founder and former CEO of the BitMEX crypto exchange. Last week, Hayes told CoinDesk that he considers the Fed’s rate policy to be only a “sideshow”, while the “real show”, he believes, is the US Treasury Department.
The influencer suggested that fiscal actions, such as deficit spending, tax policy, and buybacks, are much more impactful on inflation and economic growth than the Fed hiking or cutting rates. In particular, he stated that the massive bond issuance by the Treasury a few years ago ensured a large liquidity flow into the markets and propelled the rally in bonds, crypto, and gold in late 2022. Those rallies took place regardless of the Fed Reserve’s hawkish stance and high interest rates.
Bitcoin regains $105,000 on Iran-Israel truce
Over the last day, Bitcoin price succeeded in recovering, shooting up by approximately 7.26% and hitting $106,200 as it left behind the $98,920 level. Today, so far, BTC has been trading in a range between 105,000 and $105,500.
The surge came after Iran agreed to make a ceasefire with Israel after the recent US airstrikes on its nuclear plants, which Iran claimed to have been “peaceful” power plants and not related to nuclear weapon creation.
Bitcoin quickly reacted to this radical change in the geopolitical situation in the Middle East, showing relief over this de-escalation. However, after that rocket and drone strikes between the countries resumed.
Meanwhile, entities continue to accumulate Bitcoin, using the dip that took place over the weekend. Michael Saylor’s Strategy announced a 245 BTC purchase worth $26 million. Following suit, Metaplanet also acquired 1,111 BTC for $118.2 million. Currently, Strategy holds a total of 592,345 BTC, while Metaplanet owns 11,111 BTC.
While so far the Fed Reserve has kept the interest rates unchanged, all eyes are now on the next FOMC meeting in July to see if Powell will finally announce a rate cut in a month.