'Regime Change' at Fed? Crypto Rallies as Pressure Mounts on Chairman Jerome Powell

All things being equal, easier monetary policy tends to be good for risk assets — crypto surely among them. Bitcoin rallied to above $120,000 for the first time ever over the weekend as pressure on hawkish U.S. Federal Reserve Chairman Jerome Powell to step down or be fired amped even higher. Coincidence?

To review, Jerome Powell — who rushed through 75 basis points of rate cuts prior to the 2024 election — quickly switched to a more hawkish stance following Donald Trump's election (though he did allow one more 25 basis point cut just after November), and it famously hasn't sat well with the president.

"Frankly, it's about breaking some heads," said former Fed Governor Kevin Warsh on Fox News on Sunday. Warsh, who has been consistently touted as a leading possible replacement for Powell, added that the central bank's $2.5 billion renovation project was among several examples of how the Fed "has lost its way" and said it was time for "regime change."

Also appearing on TV on Sunday and also another contender to lead a post-Powell Fed, National Economic Council Director Kevin Hasset said the president's possible power to fire Jerome Powell is "being looked into ... but certainly if there's cause, he does."

The latest angle of attack against Powell is the Fed's $2.5 billion renovation project. Powell is being questioned not just over the massive expense, but over whether he may have misled Congress in his testimony regarding the renovation. Office of Management and Budget (OMB) Director Russ Vought last week sent Powell a list of questions regarding the project.

The Fed over the weekend created a new FAQ page on its website to give its side of the story.

Trump doesn't ease up

Adding his comments over the weekend, the president said it would "be a great thing" for the country if Powell were to exit.

"Jerome Powell has been very bad for our country," he added. "We should have the lowest interest rate on Earth, and we don’t. He just refuses to do it."

"I don’t know what he knows about building, but you talk about cost overrun," Trump said of the $2.5 billion renovation. He reminded that the project was approved and began moving forward while Joe Biden was still president.

Regulatory angle as well

While Powell has kept a publicly neutral stance towards crypto, a new Fed chair could be seen as a positive for the community even beyond what surely would be easier monetary policy.

Powell, over the years, has maintained his stance that bitcoin is a competitor to gold rather than to the U.S. dollar given that people are not using it as a form of payment but rather as an investment vehicle.

However, he has repeatedly called for clearer regulation, specifically around stablecoins and their risks to financial stability as the industry continued to grow more mainstream. He has also stressed the importance of consumer protections as well as concerns about "debanking" practices in which financial institutions are forced to cut ties with crypto firms due to the risks associated with the asset class.