Bitcoin (BTC) Price Shakes Off Early Losses Despite Powell's Dire Speech

The cryptocurrency whipsawed right after Federal Reserve Chairman Jerome Powell delivered a damning indictment of President Donald Trump's tariffs in a Wednesday speech.

Crypto traders weren’t the only ones closely watching Federal Reserve Chairman Jerome Powell on Wednesday. Economists and political scientists also tuned in to hear what the top U.S. central banker had to say about President Donald Trump’s trade policies.

After months of Trump administration officials hinting at the possibility of a trade war with China and other nations, the president went ahead and slapped tariffs on $250 billion worth of Chinese goods this spring. The move sparked immediate backlash from several economists, who warned that the tariffs would ultimately harm U.S. consumers and businesses more than they would help.

However, Powell had a different take on the tariffs during his Wednesday afternoon speech at the Economic Club of Chicago.

“The level of the tariff increases announced so far is significantly larger than anticipated, and they are likely to have a material impact on the U.S. economy, reducing output and raising prices,” Powell said.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. In the broadest terms, the administration’s stated policies are likely to result in higher inflation and slower growth.”

The Fed chair’s ominous outlook for the U.S. economy triggered a precipitous drop in bitcoin’s price. But the digital asset recovered quickly from the $83K level during after-hours trading.

“Bitcoin (BTC) dropped roughly 2%, from $85,300 to $83,300, within 30 minutes of Fed Chair Jerome Powell’s 1:30 PM EST remarks,” said Dylan Bane, an analyst at crypto data intelligence firm Messari.

“Equities followed a similar pattern. The Dow Jones, S&P 500, and Nasdaq fell between 1.5% and 4% over the course of the day, suggesting a broad-based risk-off reaction to Powell’s comments.”

Overview of Market Metrics

Bitcoin is currently trading at $84,891.80, continuing its upward momentum with a modest 0.12% gain since yesterday and reflecting a strong 7.09% increase over the past week. The asset fluctuated between $83,314.85 and $85,428.28 during the past 24 hours, indicating a relatively stable trading session despite some broader market hesitation.

Trading volume dipped by 7.13% to $24.59 billion, and market capitalization stands at $1.68 trillion, down by a marginal 0.11% since Wednesday. Bitcoin dominance slipped slightly by 0.02% to 63.92%, a subtle indication that altcoins are beginning to regain minor footing following recent underperformance.

Meanwhile, futures activity showed a modest decline, with total BTC open interest falling 0.54% to $54.36 billion. According to Coinglass, total liquidations amounted to $3.96 million over the past day, with short sellers getting hit the hardest and accounting for $3.92 million of that figure. Long positions, in contrast, remained relatively untouched at just $37,970, signaling strong market confidence and a continued short squeeze environment.

Powell Warns Trump Of Negative Impact Of Tariffs

The Fed chair issued a clear warning about the impact of Trump’s tariffs as he spoke about the U.S. economy at the Economic Club of Chicago.

“The new administration is in the process of implementing substantial policy changes that may have implications for the outlook for inflation and unemployment,” Powell explained.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. In the broadest terms, the administration’s stated policies are likely to result in higher inflation and slower growth.”

What Powell is alluding to is a conundrum economists refer to as “stagflation,” where economic growth stagnates while inflation rises, putting central bankers in a pickle because they can’t rein in one metric without adversely impacting the other.

Both bitcoin and traditional assets reacted with a selloff, but going forward, Bane said he expects the cryptocurrency to eventually reduce its correlation with stock markets, which currently stands at 71%, according to Newhedge.

“Until the full impact of tariffs and inflation dynamics plays out, we expect BTC to continue moving broadly in tandem with equities,” Bane said.

“A true decoupling likely hinges on a fundamental restructuring of the international economic order that could see the U.S. dollar losing its status as the world’s reserve currency.”