A looming wave of interest rate cuts and opportunities in the cryptocurrency world?
U.S. President Trump has kicked off the "draft battle" for the Federal Reserve Chairman, and the future direction of monetary policy is quietly changing.
"I know who I'm going to choose." On November 30, Trump confidently announced to the media aboard Air Force One returning to Washington that he has decided on the next Federal Reserve Chairman. Although he did not disclose specific names, he clearly stated that he hopes the person he nominates will be able to lower interest rates.
As Powell's term is set to end in May 2026, Trump is intensively seeking a new chairman willing to implement aggressive rate-cutting policies. This personnel change not only concerns the direction of U.S. monetary policy but may also become an important variable affecting the global asset landscape.
01 Four Candidates for the Federal Reserve Chair Position
Trump's 'transformation plan' for the Federal Reserve has entered a critical phase. It is reported that the range of candidates for Federal Reserve chairman has been narrowed to five, including current Federal Reserve governor Christopher Waller, Michelle Bowman, former Federal Reserve governor Kevin Walsh, White House National Economic Council director Kevin Hassett, and BlackRock executive Rick Reed.
U.S. Treasury Secretary Basant stated that he plans to initiate a new round of interviews and submit a 'shortlist of quality candidates' to Trump by the end of November. Trump himself is also expected to finalize the nominee by the end of this year.
Among the many candidates, two candidates named 'Kevin,' Hassett and Walsh, are seen as frontrunners. Trump has publicly stated: 'Both Kevins are good,' showing his preference for these two candidates.
Hassett is the candidate most closely related to Trump among the finalists. He has held senior positions in the White House during both of Trump's terms and has worked at Kushner's private equity firm. For Trump, who places a high value on loyalty, Hassett is undoubtedly a highly attractive choice.
Walsh has extensive experience with the Federal Reserve, having served as a governor during the 2008 global financial crisis. He criticized the Federal Reserve for deviating from its mission of price stability and for excessive quantitative easing during non-crisis periods, a position that satisfies Trump.
02 Trump's Long-standing Grievance with Powell
The conflict between Trump and current Federal Reserve chairman Powell has long been public. Since the beginning of this year, Trump has repeatedly criticized Powell and the Federal Reserve's monetary policy, constantly pressuring for interest rate cuts.
Trump even suggested firing Powell on the grounds of budget overruns in the Federal Reserve's headquarters renovation project. On July 15, Trump discussed the matter of removing Powell with Republican lawmakers at the White House, even showing a letter proposing to dismiss him, which triggered a 'triple kill' in U.S. stocks, currency markets, and bond markets.
Despite Trump's frequent pressure, Powell insists on maintaining stable interest rates. Since January of this year, the Federal Reserve has decided to keep interest rates unchanged at five consecutive monetary policy meetings, with the latest meeting on July 30 keeping rates locked in the 4.25% to 4.50% range.
According to U.S. law, the president does not have the authority to directly fire the chairman of the Federal Reserve; he can only initiate judicial proceedings for removal through 'misconduct, dereliction of duty, or gross negligence,' a precedent that has never occurred in history. This legal safeguard allows Powell to remain in his position until the end of his term.
03 Unprecedented Challenge to the Independence of the Federal Reserve
Trump's intervention in the Federal Reserve is not limited to verbal criticism. On August 25, he announced via social media that he had fired Federal Reserve governor Lisa Cook that day, a move that caused a stir in various circles. U.S. media reported that this was the first time in 111 years that a president had fired a Federal Reserve governor.
In addition, Trump nominated White House economic advisor Stephen Miller to serve as a Federal Reserve governor, making him the first Federal Reserve governor to serve simultaneously in the White House and the Federal Reserve since 1935. Miller cast a dissenting vote just one day after taking office, advocating for a 50 basis point rate cut, which aligns closely with Trump's public demands.
These actions have raised market concerns about the independence of the Federal Reserve. Chief economist Lu Zhe from Dongwu Securities stated: 'Trump's intervention in the independence of the Federal Reserve not only affects market expectations for interest rate cuts but will also impact the credit of the current dollar system.'
The International Monetary Fund (IMF) has also explicitly warned that if the independence of central banks is politically interfered with, it will jeopardize macroeconomic stability, financial stability, and market confidence. Historical lessons are not far away: before the 1972 election, U.S. President Nixon pressured Federal Reserve chairman Burns to implement an expansionary monetary policy, leading to a surge in U.S. inflation rates above 13% in the late 1970s.
04 The Direction of Monetary Policy and Market Impact
The Federal Reserve officially began its interest rate cut cycle in September this year, and in October, it cut rates for the second consecutive time. The market currently expects the probability of a rate cut in December to have risen to about 70%.
Different candidates for the chairmanship could significantly impact the path of monetary policy. Analysts point out that if Waller is nominated, the market may trade based on the Federal Reserve's interest rate cut space, which still mainly depends on economic fundamentals, and asset pricing as well.
On the other hand, if Hassett and other candidates closely related to Trump are nominated, the market may trade on the Federal Reserve's loss of independence and greater room for interest rate cuts, which could lead to easier rises in U.S. stocks and gold, while U.S. bond yields and the dollar index may decline more easily.
CITIC Securities analysis suggests: 'If Hassett wins, it will trigger the market's 'muscle memory' of the 'Federal Reserve losing independence,' which is bearish for overall dollar assets and bullish for gold; the market may raise expectations for interest rate cuts next year.'
05 Potential Impact on the Cryptocurrency Market
The cryptocurrency market is exceptionally sensitive to changes in monetary policy. On December 1, the cryptocurrency market experienced a significant drop, with Bitcoin temporarily falling below $87,000, and the intraday drop exceeding 5%; Ethereum also saw an intraday drop of over 5%, falling below $2,900.
This drop may be related to a rumor in the market about Powell resigning. Although the rumor was later confirmed to be false, it reflects the market's sensitivity to personnel changes at the Federal Reserve.
If Trump successfully appoints a Federal Reserve chairman willing to implement aggressive interest rate cuts, the global liquidity environment may once again loosen, which is generally favorable for risk assets like cryptocurrencies. The low interest rate environment brought about by rate cuts could drive more funds into high-risk, high-return assets, including the cryptocurrency market.
However, this politically driven monetary policy also brings uncertainty. Once the market begins to doubt the Federal Reserve's ability to control inflation, it could trigger broader market volatility, with the cryptocurrency market also struggling to remain unaffected.
A loss of independence for the Federal Reserve means a significant increase in uncertainty regarding future monetary policy paths, which could undermine investor confidence in dollar assets, while cryptocurrencies like Bitcoin may sometimes be seen as alternative choices outside the traditional financial system.
The coming weeks will be a critical decision-making period. U.S. Treasury Secretary Basant revealed that Trump may announce nominations before Christmas on December 25. Regardless of who the final candidate is, the market has already begun to prepare for the potential policy changes.
The recent sharp fluctuations in the cryptocurrency market are just a prelude. As of the time of writing, Bitcoin is at $87,100, Ethereum at $2,837, and the number of liquidations across the network exceeds 17; these numbers reflect the market's instinctive response to uncertainties in future monetary policy.
The contest for the chairmanship of the Federal Reserve is not just a personnel appointment; it is also a decision that concerns the global flow of funds. Historical experience shows that whenever the independence of the Federal Reserve is challenged, there are profound changes in the global asset allocation pattern. This time, whether the cryptocurrency market can benefit from it remains to be seen.
