The Bitcoin and cryptocurrency market is facing heightened volatility as U.S. President Donald Trump escalates his battle with the Federal Reserve.
Trump’s unprecedented move to ‘fire’ Fed Governor Lisa Cook, paired with growing friction with Fed Chair Jerome Powell, has rattled investor confidence and triggered a broad sell-off in risk assets, including Bitcoin and Ethereum.
The Trump – Powell Fallout
Markets had initially welcomed Powell’s dovish hints at the Jackson Hole symposium, where he suggested the Fed may be closer to easing its restrictive monetary policy.
However, optimism quickly faded as Trump pressed for more aggressive rate cuts and attempted to remove a sitting Fed governor, an act widely seen as undermining central bank independence.
The fallout was immediate. Bitcoin (BTC), which had surged past $117,000 after Powell’s remarks, dropped below the key $111,000 level and is now trading more than 12% off its mid-August all-time high.
BTC's price trends to the downside on the daily chart. Source: BTCUSD on Tradingview
Ethereum (ETH) slid over 5% overnight, with other leading cryptocurrencies like Solana (SOL), XRP, and Dogecoin (DOGE) also posting steep losses.
Bitcoin Reacts to Uncertainty
The total crypto market capitalization has fallen 2.48% to $3.79 trillion, while trading volume spiked 67% to $220 billion, signaling frantic repositioning by traders. Nearly $900 million in leveraged positions were liquidated in the past 24 hours, amplifying the downturn.
Bitcoin’s dominance has slipped to 57.5%, with Ethereum’s share rising slightly to 14.4% as ETF flows diverged. U.S. Bitcoin Spot ETFs saw $23 million in net outflows on Friday, led by iShares Bitcoin Trust, while Ethereum Spot ETFs recorded $338 million in inflows, highlighting shifting investor sentiment.
Altcoins were not spared. BNB, Cardano, and TRON all posted overnight declines of 3–4%, while meme favorite Dogecoin slumped nearly 5%. A few tokens bucked the trend, HyperLiquid (HYPE) gained 2.6%, and VeChain (VET) climbed 3.6%, but most of the top 100 coins bled heavily.
What’s Next for Bitcoin and the Fed?
Analysts warn that political interference at the Fed could further destabilize markets. Prediction markets currently give just a 9% chance of Powell being ousted in 2025, but Trump’s actions have raised legal and institutional concerns.
If Trump succeeds in reshaping the Fed to favor easier policy, risk assets like Bitcoin could benefit longer term from looser liquidity. For now, traders are focused on key technical levels. Bitcoin must reclaim the $111K–$112K zone to avoid a deeper slide toward $100K.
Cover image from ChatGPT, BTCUSD chart from Tradingview
