Jerome Powell steps down as Fed chair amid Bitcoin’s cloudy outlook: ‘Going to face some tests’

Jerome Powell, the embattled U.S. Federal Reserve chair, has ended his second four-year term. His tenure officially ended yesterday, the 15th of May. 

In a statement, the central bank said that Powell will continue to hold the position in a temporary capacity until the new chair, Kevin Warsh, is sworn in, as per past transitions.

Even so, he will continue to serve as a member of the Board of Governors, a role whose term runs until January 2028. 

That said, as his tenure came to a close, Powell faced intense political warfare from President Donald Trump. According to Trump, Powell was too slow to cut interest rates, while the Fed chair insisted on data-driven decisions. 

In fact, his data-driven approach made global markets, from equity to the U.S. dollar index and crypto, instantly react to his statements and policy decisions. His actions affected broader liquidity conditions, which directly shaped risk sentiment and appetite. 

Despite Powell defending what analysts deemed as Fed independence, it remains to be seen whether Warsh will succumb to Trump’s pressure. 

That said, Warsh’s tenure is set for a bumpy start amid sticky inflation and uncertainty around the West Asia crisis, which could spill over into Bitcoin and the crypto market. 

What’s next for Bitcoin?

According to Coinbase analysts, crypto upside exists; however, sticky inflation could stall the upward momentum for now. 

Inflation is back, limiting crypto’s liquidity rally potential. Hotter CPI and PPI forced markets to reprice inflation risk. Real wages and sentiment fell; jobless claims remain low. Crypto upside exists, but beta expansion likely requires improved liquidity or lower inflation.

The April U.S. Consumer Price Index (CPI) showed headline inflation surged to 3.8% year-over-year (YoY). This was hotter than the forecasted 3.7%, while monthly CPI also rose 0.4% amid energy shocks due to the ongoing West Asia crisis. 

Notably, the next Fed rate decision, and likely the first one for the new chair, Warsh, will be held in mid-June. Already, the market was pricing another interest rate pause amid the sticky inflation. 

According to Coinbase analysts, Bitcoin and crypto could only rally higher if inflation risk faded or the CLARITY Act passed the Senate floor vote. 

FundStrat’s Tom Lee also underscored similar caution, noting that the rising bond yield and inflation would spell trouble. 

We’re going to face some tests later this summer.

Final Summary

• Jerome Powell’s second 4-year term as Fed chair came to an end on May 15, but he will still be a member of the Fed’s board of governors. 
• On the macro and geopolitical backdrop, Coinbase analysts cautioned that sticky inflation could cap crypto’s potential upside.