Why Powell's 'Dovish Pause' Could Make or Break Bitcoin

The 96% probability of a Fed rate hold this Wednesday isn't news. What Jerome Powell says afterward could reshape crypto markets for months.

After three consecutive 0.25% rate cuts, the Federal Reserve's first pause sets up a pivotal moment. Powell's press conference will reveal whether this break signals dovish patience or hawkish resolve—a distinction that could send bitcoin soaring or tumbling alongside traditional risk assets.

The stakes are higher than usual. Trump's housing affordability push, threats to Fed independence, and brewing currency market tensions create a volatile backdrop where every word matters.

The Pause That Speaks Volumes

CME FedWatch futures price in that 96% hold probability, but the real question is what kind of pause we're getting.

A hawkish pause would see Powell highlighting persistent inflation risks, crushing rate-cut bets and pressuring bitcoin lower. A dovish pause signals temporary restraint with cuts resuming soon—potentially lifting crypto alongside stocks.

Morgan Stanley expects dovish signals, with the Fed likely retaining policy statement language about "considering the range and timing for further adjustments." This keeps easing on the table, preserving hope for crypto bulls.

Watch for dissenters. Trump appointee Stephen Miran is expected to push for a bold 50-basis-point cut. More dissents would amplify dovish expectations, boosting bitcoin's prospects.

Trump's Housing Gambit Changes Everything

Powell can't dodge questions about Trump's $200 billion mortgage bond purchase announcement and the executive order restricting institutional investors from single-family home purchases.

Allianz Investment Management warns these measures "risk pulling forward demand, inflating prices." The mortgage bond purchases could front-load housing demand, while the institutional investor ban offers limited impact given their small market share.

If Powell acknowledges these policies as inherently inflationary, market volatility could spike. Trump's tariffs already carry delayed inflationary expectations for this year—adding housing policy concerns creates a perfect storm.

Dollar Strength's Crypto Conundrum

ING analysts see Powell's rate hold explanation potentially lifting the dollar, creating headwinds for bitcoin.

"Given recent U.S. asset market and activity performance, he'll struggle to argue financial conditions are restrictive and need loosening," they note. "This could pour cold water on second Fed rate cut notions and lift the dollar against low yielders like the yen and euro."

Dollar strength typically pressures bitcoin and other crypto assets. With Japanese yen intervention fears brewing and bond market volatility from Japan's fiscal issues, currency market chaos could spill into crypto.

Most observers expect 1-2 rate cuts this year, but JPMorgan stands alone predicting no moves in 2025 followed by hikes in 2026—a stark outlier that adds uncertainty.

Beyond the Numbers: Political Calculations

Powell faces more than monetary policy questions. The DOJ investigation targeting him personally—which Trump frames as political vengeance for insufficient rate cuts—looms over proceedings.

He'll likely dodge probe questions while downplaying bond market fears. But the subtext is clear: Fed independence faces unprecedented political pressure.

For crypto investors, this political dimension matters. Bitcoin often benefits from institutional uncertainty and dollar debasement fears. A Fed seen as politically compromised could paradoxically boost crypto's safe-haven narrative.