The Federal Reserve’s interest rate policy is a major factor affecting the liquidity in the markets and the crypto markets are no exception.
When the central bank trims rates, it injects more liquidity into the crypto market. Otherwise, if the bank hikes rates or doesn’t make any changes, liquidity flows out.
Related: Analyst predicts Bitcoin will breakdown further as millions get wiped out
The Fed has a dual mandate of maximum employment and keeping inflation under check, and Chairman Jerome Powell has refused to lower rates as per President Donald Trump’s dictates.
Though Trump has repeatedly threatened to fire Powell, he has refrained from doing so. But the banker’s tenure as the Fed Chair ends in May 2026. He can either make an exit from the Fed or continue serving a term as governor that lasts until 2028.
The Trump administration has hinted that he will find Powell’s replacement by the end of the year and a top financial analyst believes his departure from the central bank will supercharge the markets.
James Thorne, chief market strategist at Wellington-Altus Private Wealth Inc., said Powell’s replacement will change the composition of the Federal Open Market Committee (FOMC) in 2026, effectively ending the era of the “Progressive Left Keynesian control” of the central bank. He claimed that Powell’s policies have generated a housing recession and distorted credit availability.
Thorne underlined that Bitcoin adoption has continued to accelerate in the hope of legislation promising greater regulatory clarity.
“Bitcoin digital scarcity remains unparalleled, compelling institutional adoption and driving ongoing innovation across Wall Street.”
However, some investors are selling Bitcoin as its long-term case has been strengthening. Thorne called it “an enduring example of irrational behavior in markets.”
““Buy low, sell high” is simple to say but remarkably difficult to execute.”
