- Bitcoin reached a new all-time high in May but has been unable to maintain momentum in the face of economic uncertainty.
- Concerns over a possible $37–$40 trillion U.S. dollar collapse and warnings from figures like Elon Musk are affecting market sentiment.
- Donald Trump announced he will soon reveal his selection for the next Federal Reserve chair, impacting expectations for interest rates and financial markets.
- The Federal Reserve is expected to keep rates steady for the next two meetings, with uncertainty about potential changes later this year.
- A potential rate cut by the Fed could drive Bitcoin and other risk assets higher, according to crypto market analysts.
Bitcoin has struggled to break beyond recent highs after reaching a fresh peak in May. Recent volatility comes amid growing concerns about a looming financial crisis tied to U.S. dollar stability and uncertainty over future monetary policy decisions.
The price of bitcoin surged after the November election win of Donald Trump, but has since faced headwinds as Federal Reserve chair Jerome Powell addresses increasing risks to the U.S. economy. Discussion of a potential $37–$40 trillion “ticking time bomb” tied to U.S. dollar debt has contributed to investor caution. Elon Musk, CEO of Tesla, has publicly supported warnings regarding the possibility of a sharp dollar decline.
Trump recently told reporters that his decision regarding the next Federal Reserve chair would be announced “very soon,” according to comments reported by Reuters. In a video posted to social media, Trump said, “If we had a good Fed chairman, he would lower rates and if inflation happened in a year from now or two years later, [he would] raise rates,” urging for immediate interest rate cuts.
Market expectations indicate that the Federal Reserve will likely keep rates steady in its June and July meetings, with uncertainty around what could happen in September. Trump named former Fed governor Kevin Warsh as a leading candidate for the Fed chair position and described him as “very highly thought of.” Warsh has stated that lowering interest rates could be possible if the Fed reduced its balance sheet, telling a panel at Stanford University, “if the printing press could be quiet, we could have lower policy rates.”
Crypto market analysts at Bitfinex commented that a Fed rate cut would be “bullish for risk assets like bitcoin.” They suggested bitcoin could target the $120,000 to $125,000 range in June if it maintains support above $105,000, pointing to multiple possible factors influencing the Fed’s decision-making.
Meanwhile, Trump has continued to push for lower rates, while the current Fed approach has been to hold rates steady following the beginning of a rate-cutting cycle last September. The Fed cited concerns about future inflation due to Trump’s proposed trade tariffs, stating these could push inflation higher.
Recent employment figures exceeded expectations, which investment manager Nicholas Hyett of Wealth Club said could strengthen arguments in favor of leaving rates unchanged. Hyett explained that strong wage growth gives the Fed less reason to cut interest rates, even as fiscal policies aim to stimulate economic activity.
Upcoming U.S. consumer price index (CPI) inflation data is anticipated to show an increase after several months of easing inflation. In April, the White House said it was reviewing whether Trump could remove Powell as Fed chair, but Trump has since stated he will not try to replace Powell before his term ends next year.
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