Bitcoin Stays Below $85K as U.S. Stagflation Fears Rise Amid Trump-Powell Tensions
Bitcoin (BTC) remained largely unchanged just under $85,000 late Thursday as growing tensions between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell fueled additional uncertainty in the markets.
Markets saw a downturn on Wednesday following hawkish remarks from Powell, who criticized Trump’s tariff policies. Powell warned that these policies would likely lead to economic slowdown and rising prices, a scenario economists label “stagflation.” He emphasized that combating inflation would be his central focus for the time being, indicating potentially tighter Federal Reserve policies than previously anticipated.
The rift between Trump and Powell has been escalating since Trump regained the presidency. Although Trump nominated Powell for his first term, the president has been openly dissatisfied with Powell’s policies. Despite this, Powell is set to remain in charge of the central bank until May 2026 and has repeatedly stated that he intends to finish his term, asserting that the president does not have the authority to remove him.
On Thursday, The Wall Street Journal reported that Trump has been privately considering firing Powell for months, citing anonymous sources. Former Federal Reserve Governor Kevin Warsh is reportedly being considered as a potential replacement for Powell, though Warsh himself has advised against any moves to oust the Fed chair. Treasury Secretary Scott Bessent also warned that removing Powell could destabilize U.S. markets, emphasizing the importance of the Fed’s independence from political influence.
The likelihood of Trump attempting to remove Powell this year has risen to 19% according to blockchain-based prediction market Polymarket, marking the highest probability since the market’s launch in late January.
Trump’s comments came just as the European Central Bank (ECB) announced its seventh consecutive rate cut, warning of a deteriorating growth outlook in the eurozone.
Adding to market anxiety, the Philadelphia Fed manufacturing index, released Thursday, revealed a significant drop in activity, sinking to its lowest level in two years (-26.4). Concurrently, the prices paid index reached its highest point since July 2022, further stoking concerns over the potential economic impact of Trump’s aggressive tariff policies, which some fear could lead the U.S. into stagflation.
The S&P 500 and Nasdaq indexes traded flat during the day, reflecting the broader market uncertainty.
Meanwhile, in the crypto market, Bitcoin and Ethereum (ETH) saw modest gains of 0.8% over the past 24 hours. Other assets in the CoinDesk 20 Index also posted gains, with Bitcoin Cash (BCH), NEAR, and AAVE leading the way.
Bitcoin Traders Position for Upside and Downside Amid Market Uncertainty
Bitcoin’s price has remained relatively stable within the $83k to $86k range, with traders leaning toward bullish positions while still hedging for potential declines.
According to Deribit, a large number of traders are buying call options for Bitcoin at the $90k to $100k strike prices expiring in May and June. The high demand for calls signals expectations of a continued rally in Bitcoin’s price.
At the same time, some traders are selling put options to fund these bullish positions. Meanwhile, there’s renewed interest in purchasing put options at the $80k strike price, set to expire this month, signaling preparations for a potential price drop. Buying a put option is essentially a hedge against price decreases, providing downside protection.
This two-way market activity coincides with the VIX, Wall Street’s volatility index, remaining well above its 50-day average. Despite pulling back from recent highs, the elevated VIX suggests that the broader macroeconomic situation is still unfolding, adding to the cautious sentiment in the markets.
