Jerome Powell, the controversial chairman of the US Federal Reserve, has ended his second four-year term. His term officially ended yesterday, May 15.
In one statementthe central bank said Powell will continue to hold the position in a temporary capacity until the new chairman, Kevin Warsh, is sworn in, as in previous transitions.
Yet he will continue to serve as a member of the Board of Directors, a position whose term of office runs until January 2028.
That said, as his term came to an end, Powell faced intense political warfare from President Donald Trump. Trump said Powell was too slow to cut rates, while the Fed chairman pushed for data-driven decisions.
His data-driven approach ensured that global markets, from equities to the US dollar index and crypto, responded immediately to his statements and policy decisions. His actions affected broader liquidity conditions, which directly affected risk sentiment and willingness to take risks.
Although Powell defends the Fed’s independence, it remains to be seen whether Warsh will succumb to Trump’s pressure.
That said, Warsh’s tenure will be off to a bumpy start amid persistent inflation and uncertainty surrounding the West Asian crisis, which could spill over into Bitcoin and the crypto market.
What’s next for Bitcoin?
According to Coinbase Analysts, Crypto Advantage Exists; However, persistent inflation could hold back the upward momentum for the time being.
Inflation is back, limiting crypto’s liquidity rally potential. The higher CPI and PPI forced the markets to reassess inflation risk. Real wages and sentiment fell; unemployment claims remain low. The upside of crypto exists, but beta expansion likely requires better liquidity or lower inflation.
The April US Consumer Price Index (CPI) showed headline inflation rising to 3.8% year-over-year. This was warmer than the forecast 3.7%, while the monthly CPI also rose 0.4% due to energy shocks from the ongoing crisis in West Asia.
It is notable that the Fed’s next interest rate decision, and probably the first for the new chairman, Warsh, will take place in mid-June. The market was already expecting a new interest rate pause due to persistent inflation.
According to Coinbase analysts, Bitcoin and crypto could only rise if inflation risk decreases or if the CLARITY Act is voted through the Senate.
FundStrat’s Tom Lee too underlined similar caution, noting that rising bond yields and inflation would pose problems.
We will have some tests later this summer.
Final summary
- Jerome Powell’s second four-year term as Fed chairman expired on May 15, but he will still serve on the Fed’s board of governors.
- On the macro and geopolitical backdrop, Coinbase analysts warned that persistent inflation could limit crypto’s potential upside.