The political landscape and financial markets in the United States are once again tumultuous. On July 2, President Trump publicly called for Federal Reserve Chairman Powell to "immediately resign," citing that Powell allegedly misled Congress during his testimony, with some officials even accusing him of "lying." This political storm not only heightened concerns about the independence of the Federal Reserve but also shifted market attention to another key indicator—the U.S. M2 money supply. Currently, M2 has reached a record $22 trillion, and analysts believe this could become a potential catalyst for a Bitcoin price breakout.
On July 2, President Trump posted on his social media platform Truth Social, publicly labeling Federal Reserve Chairman Powell as "Mr. Slow" and calling for him to "resign immediately!!!" This statement marks an escalation in Trump's criticism of Powell over the past few months, implying that Powell has been slow to act on interest rate policy and has failed to meet the Trump administration's expectations for significant rate cuts.
More explosively, Trump also shared a media report claiming that Bill Pulte, the director of the Federal Housing Finance Agency (FHFA), accused Powell of lying during his Senate testimony and called for Congress to investigate him, potentially leading to his removal. Pulte posted on X that Powell's recent testimony regarding the Fed's headquarters renovation plan was "sufficient to be removed 'for cause'," accusing him of "deliberately misleading Congress."
This accusation revolves around a $2.5 billion renovation budget for the Federal Reserve headquarters. Powell clarified during a congressional hearing last week that the so-called luxury facilities (such as VIP elevators, newly installed marble, water features, beehives, rooftop gardens, etc.) were mostly part of early designs that have since been canceled, and the renovation only involves basic maintenance. However, Pulte believes Powell's testimony is deceptive.
Axios noted that for a senior government official, this is "an unusual and rare move," indicating how much pressure the White House is willing to exert on the Fed leader who has consistently resisted calls for rate cuts. The Trump administration hopes to oust Powell, with Trump stating last week that he plans to appoint a Federal Reserve chairman who can set interest rate policy according to his wishes. House Judiciary Committee Chairman Jim Jordan also indicated that Congress would examine whether to launch a formal investigation into Powell.
While Trump pressures the Federal Reserve, the Bitcoin market is closely watching another macroeconomic indicator: the U.S. M2 money supply. Currently, the U.S. M2 money supply has reached a record $22 trillion. Analysts believe this could be a potential catalyst for a Bitcoin price breakout.
Historical Correlation: Historically, Bitcoin prices have tracked the M2 money supply. M2 is the Federal Reserve's estimate of liquid assets, including cash, deposits in checking accounts, savings accounts, and other short-term savings instruments like money market funds.
Liquidity Spillover Effect: Matt Mena, a cryptocurrency research strategist at 21Shares, stated, "As the M2 money supply begins to rise again, history shows that some of that liquidity will flow into Bitcoin and other digital assets." This means that when the total amount of money in the market increases, some of the new liquidity may seek risk assets, including Bitcoin, thereby driving its price up.
Price Prediction: Cryptocurrency influencer Anthony Pompliano wrote in an email, "If Bitcoin continues to follow the growth of the money supply, we could see the price of each Bitcoin reach $150,000 by the end of the year."
Although Powell currently maintains a wait-and-see stance on interest rate cuts and has even stated that the Federal Reserve "did not overreact" to Trump's trade tariffs, in fact, "we did not react at all," the calls for a rate cut in September are growing louder. A rate cut by the Federal Reserve would mean a loosening of monetary policy, which would send a key positive signal for Bitcoin.
Trump's public pressure on Powell has once again raised concerns about the independence of the Federal Reserve. As the central bank of the United States, the independence of its monetary policy is crucial for maintaining financial stability and market confidence. Political interference in central bank decision-making could lead to irrational monetary policy, potentially triggering inflation and currency devaluation.
In this context of increasing political uncertainty and potential interference in monetary policy, Bitcoin's safe-haven attributes and anti-inflation characteristics are once again highlighted. As a decentralized digital asset not controlled by any government or central bank, Bitcoin is viewed by some investors as an effective tool against the risks of the traditional financial system and currency devaluation. When market confidence in fiat currency wavers, Bitcoin's appeal may further increase.
Despite the favorable conditions for Bitcoin from the M2 money supply and political pressure, the prospects for a Federal Reserve rate cut are not straightforward.
Inflation Stronger Than Expected: Economic data released on Friday showed inflation stronger than expected, hindering the rise of U.S. Treasury bonds. This necessitates a more cautious approach from the Federal Reserve regarding rate cuts to avoid uncontrolled inflation.
Job Market: David Morrison, a senior market analyst at Trade Nation, stated, "The Federal Reserve clearly expects inflation to remain above target. In this case, it sounds like the Fed will only cut rates if the U.S. job market significantly deteriorates." This means that the upcoming employment report will become a focal point for the market; if employment data is weak, bets on a third rate cut by the Federal Reserve may strengthen.
Trump's public pressure on Federal Reserve Chairman Powell, along with accusations from officials of him "lying," has brought new uncertainty to U.S. politics and financial markets. In this context, the U.S. M2 money supply reaching a record $22 trillion is seen by analysts as a potential catalyst for a Bitcoin price breakout. Concerns about political interference in the independence of the Federal Reserve may further enhance Bitcoin's appeal as a safe-haven asset. However, the Federal Reserve's rate cut decision will still depend on complex economic data, particularly inflation and employment conditions. Bitcoin's market performance will continue to evolve amid the intricate interplay of political maneuvering, macroeconomic indicators, and monetary policy.
Related: Can Bitcoin (BTC) benefit from the passage of the "Great Beautiful Act" and the increase in the U.S. debt ceiling?
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