Crypto Market Jumps as Trump Promises Fed Chair Who Will Cut Rates “By a Lot”

TLDR

• Trump announced he will soon appoint a new Federal Reserve Chair who supports cutting interest rates “by a lot”
• Bitcoin briefly surged toward $90,000 following Trump’s Wednesday announcement before settling near $88,000
• Top candidates include Kevin Hassett, Kevin Warsh, and Chris Waller, all favoring lower rates than current levels
• Markets show 73-76% probability the Fed will hold rates steady in January, but traders expect multiple cuts in late 2025
• Current Fed rate sits at 3.5%-3.75%, while Trump has previously pushed for rates as low as 1%

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President Donald Trump said Wednesday he will soon appoint a new Federal Reserve Chair who believes in lowering interest rates substantially. The announcement sent Bitcoin prices briefly toward $90,000 before settling near $88,000 on Thursday.

The current Fed Chair Jerome Powell’s term ends in May. Trump has been conducting interviews with several candidates to replace him.

The known finalists include White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Chris Waller. All three candidates support interest rates lower than current levels.

Trump told the Wall Street Journal last week he was leaning toward either Warsh or Hassett. However, he continued interviews on Wednesday with a meeting with Waller.

The current Federal Reserve rate ranges from 3.5% to 3.75%. Trump has previously called for rates as low as 1%, though none of the finalists have indicated they would push for rates that low.

Market Reaction and Fed Rate Expectations

Data from CME Group’s FedWatch Tool shows a 73.4% probability the Fed will hold rates steady in January. Polymarket puts those odds at 76%.

Traders are pricing in multiple rate cuts in the second half of 2025 once Trump’s appointee takes office. Markets interpreted Trump’s comments as a signal that restrictive U.S. monetary policy may end soon.

Bitcoin experienced sharp price swings during the volatile trading session. The cryptocurrency has faced months of macro pressure amid broader market uncertainty.

LVRG Research Director Nick Ruck attributed the volatility to broader risk-off sentiment in global markets, reduced ETF inflows, and deleveraging in derivatives. He said Bitcoin’s current range reflects year-end portfolio repositioning.

Vincent Liu, CIO at Kronos Research, said flows have cooled after a strong run and leverage has reset. He noted the market is waiting for a real catalyst to emerge.

Fed Independence Questions

Trump told the Wall Street Journal he believes the next Fed chair should consult with him on interest rate decisions. This approach differs from typical presidential practice of leaving rate decisions to the Fed.

The president wants his Fed chair pick to help bring down mortgage rates. However, the Fed rate has limited effect on longer-term borrowing costs like mortgages.

Mortgage rates are more influenced by the 10-year Treasury note yield, which investors move based on expectations for economic growth and inflation. That rate has changed little over the past year.

Mortgage rates have remained in the 6.3%-6.4% range since Labor Day. They show little indication of moving lower despite Trump’s stated desires.

Chris Waller is one of the early advocates among current Fed policymakers for lower rates. He is also known as a defender of Fed independence.

Bitcoin’s price held above $81,000, which analysts consider the True Market Mean. Liu said losing that level would increase the risk of a prolonged downturn.

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