Bitcoin has surged over the past week, reaching an unprecedented high of $123,000 per bitcoin as traders anticipate a significant market shift. This surge comes amidst a backdrop of political tension and economic uncertainty, with the U.S. president Donald Trump’s support for bitcoin and crypto assets playing a pivotal role. The bitcoin price has risen by approximately 60% from its April lows, buoyed by Trump’s endorsement even as the Federal Reserve maintains steady interest rates.
Traders are now speculating that potential interest rate cuts by the Federal Reserve could further boost the bitcoin price. However, this optimism is tempered by the looming threat of a political crisis at the Fed. U.S. congresswoman Anna Paulina Luna has claimed that the firing of Federal Reserve chair Jerome Powell is “imminent,” fueling fears of an independence crisis at the Fed. This comes as Trump continues to attack Powell over interest rates, raising the possibility of a “regime change” at the central bank.
The Trump administration is reportedly investigating the Fed’s $2.5 billion renovation project as a potential means to force Powell’s resignation. This investigation has led to questions about whether Powell may have misled Congress regarding the renovation. The odds of Trump removing Powell have increased significantly in recent weeks, climbing from under 10% in June to over 20% this week on the crypto-powered PolyMarket prediction platform.
Many bullish bitcoin traders and investors believe that the bitcoin price will rise more rapidly if the Fed begins to lower interest rates. This is because lower interest rates encourage faster cash flow through the economy, which is generally positive for risk assets like bitcoin. Geoff Kendrick, head of digital assets research at Standard Chartered Bank, noted that recent indications from Trump about naming a replacement for Powell early could drive markets to price in more Fed rate cuts sooner, increasing investor concerns about Fed independence—both of which are positive for term premium.
The new Fed chair, appointed by Trump either this year or once Powell’s term ends in 2026, is widely expected to be supportive of lower interest rates. The bitcoin price has continued to hit fresh all-time highs through 2025, dispelling claims that its historical 13-year run to 2022 was solely due to the global zero interest rate policy (ZIRP) that followed the 2008 financial crisis. The Fed’s decision to keep interest rates on hold last month, after kicking off a reduction cycle in September, has been seen as evidence of political bias by some critics.
Powell has defended the Fed’s approach, stating that the expected increase in inflation due to Trump’s global trade tariffs justifies a “wait-and-see” approach to adjusting interest rates. The market is largely certain that the Fed will hold rates steady again later this month. However, Trump has renewed his attacks on Powell, criticizing Fed policy and suggesting that he may reconsider firing Powell. This political turmoil adds another layer of uncertainty to the already volatile bitcoin market, as traders and investors navigate the potential implications for both the Fed and the broader economy.
