Bitcoin Rally Halts as Fed Chairman Powell Concerns About Stagflation
“We may find ourselves in a difficult situation where our dual mandate objectives conflict,” Powell said of the impact of Trump's tariffs.
Author: Stephen Alpher, Helen Brown, Christian Sandor Updated April 16, 2025, 6:52 PM Published April 16, 2025, 5:59 PM
Key points:
- Federal Reserve Chairman Jerome Powell expressed significant concerns about the impact of President Trump's tariff policies.
- Bitcoin and stock markets fall after Powell's warning.
- One analyst noted that the “very aggressive” approach suggests a rate cut in May is likely out of the question unless there are major changes in the market or the economy.
Bitcoin's moderate rally to a potential $86,000 level quickly stalled during U.S. afternoon trading on Wednesday after Federal Reserve Chairman Jerome Powell warned of the consequences of President Trump's tariff policies.
“The level of tariff increases announced so far is significantly higher than originally expected,” Powell said in his speech. “This will likely also be true for the economic impact, which could include higher inflation and slower economic growth.”
In other words, stagflation may be reminiscent of much of the 1970s, when the United States experienced low economic growth and double-digit inflation.
“We may find ourselves in a difficult situation where our dual mandate objectives conflict with each other,” Powell added.
The price of Bitcoin (BTC) fell by about 2.5% in just a few minutes after Powell's speech and is now at $83,700, down 1.5% over the past 24 hours.
US stock indexes, which had been trying to recover from early declines, also lost value, with the Nasdaq index falling 3.4% to a session low.
Powell also noted that as cryptocurrencies become more popular, there is a need to establish a legal framework for stablecoins. He added that banking regulations around cryptocurrencies will likely be “partially relaxed.”
In March, the U.S. Senate Banking Committee approved a bill to regulate stablecoin issuers, marking the committee's first approval and a major step toward legislation in the U.S.
Hawkish Fed Assesses Cryptocurrency and BTC
“Powell has been very aggressive,” Quinn Thompson, chief investment officer at hedge fund Lekker Capital, said on Telegram, noting that Powell had downplayed the market turmoil of the past week, characterizing it as “orderly market functioning.”
“I would have expected him to take into account the increased volatility and gaps in the Treasury market, but that hasn't happened,” Thompson added.
Thompson said Powell's tone suggested investors should temper their expectations for rate cuts at upcoming meetings, as that could put pressure on risk assets, including cryptocurrencies.
“A May rate cut is probably completely out of the question unless the Fed steps in for bad reasons, and I don’t think June will be an exception,” Thompson concluded. “The bullish scenario for cryptocurrency and Bitcoin in particular is liquidity and policy intervention. Both of those scenarios seem very far from reality, so it’s hard for me to see a positive picture in the near term.”
UPDATE (April 16, 18:40 UTC): Added additional comments from Chairman Powell on stablecoins. Added analyst comment.
