When Trump continuously attacks the Federal Reserve (Fed), the market is increasingly worried that he may not only stop at criticism or legal constraints, but also directly fire Chairman Powell. If the Fed has to compromise in this power struggle, it could undermine the credibility of the USD and push the US economy into crisis. Against the backdrop of concerns about the shaky US economic foundation, a wave of US asset sell-offs is occurring.
"Stocks - Bonds - Foreign Exchange" simultaneously plummet, gold and Bitcoin rise against the trend
On Monday, US assets experienced a "Black Monday" with a simultaneous plunge in stock, bond, and foreign exchange markets. All three major stock indices dropped sharply: Dow Jones fell 2.48%, Nasdaq dropped 2.55%, and S&P 500 lost 2.36%. The tech stock group collapsed severely, Tesla dropped over 5%, Nvidia fell over 4%, and the total market capitalization of the "7 tech giants" evaporated $404.6 billion. The US 10-year Treasury bond yield increased 7 basis points to 4.41%, while the 30-year yield jumped 10 basis points to 4.91%. In the foreign exchange market, the USD index sharply declined 0.9% to near 98 – its lowest level in 16 months.
However, in complete contrast to the gloom of USD-denominated assets, Bitcoin unexpectedly surged, reaching a peak of $88,877 – its highest in a month, increasing 1.42% in 24 hours. Simultaneously, gold continued to shine as spot gold prices soared 2.90% to $3,423, setting a new historical record.
Harshly criticizing Powell, the Fed's neutrality is questioned
Recently, Trump has repeatedly attacked Fed Chairman Jerome Powell, accusing him of pursuing an overly tight monetary policy and threatening to fire him, with the aim of finding a "scapegoat" for the risk of economic recession. He openly demanded that the Fed immediately lower interest rates and repeatedly stated at various events that federal independent agencies should follow the president's directives. This raises concerns that Trump could weaken the Fed's independence, turning the agency into a tool for implementing the president's economic policy.
The market's confidence in the Fed's political neutrality is facing an unprecedented challenge. For decades, the Fed has played a core role in the global asset allocation system, and global capital flows into US assets largely depend on trust in the Fed's professional capabilities and independence. However, if the Fed compromises in this power struggle, policy effectiveness will be damaged, trust in the Fed will be eroded, US government bonds will no longer be a safe haven asset, and the USD will lose its natural status as a high-value currency. This could lead to a complete reassessment of the global asset pricing system.
Currently, Wall Street generally believes that the Fed's choice to lower interest rates last year and maintain the current rate is a rational response to economic realities and expectations, not influenced by political motives. The question of whether the Fed will accelerate the interest rate cut process under political pressure, or whether Powell will be replaced, is becoming a new uncertain factor alongside Trump's tariff policy.
Capital flows from USD-denominated assets are shifting to gold and Bitcoin for refuge.
In recent years, Bitcoin and US stocks – especially tech stocks – have had a close correlation. However, April data shows that the correlation coefficient between Bitcoin and Nasdaq has sharply dropped from 0.6 at the beginning of the year to 0.35. In the same period, the inverse correlation between gold and S&P 500 increased to -0.42. This shift was further reinforced on the recent Monday: when tech stocks plummeted 4%, Bitcoin unexpectedly broke through an important resistance level, while gold prices rose nearly 3% in just one day.
The reason behind this capital flow change is that when independent monetary policy risks being interfered with by executive power and potentially becoming a political tool at any time, global capital will be forced to proactively reassess which assets are truly reliable.
Gold, with thousands of years of history, limited reserves, and natural scarcity, independent of national credit or policy influence, has always been seen as an asset that maintains stable value over time in a complex and volatile financial world. Bitcoin, with similar characteristics, is dubbed "digital gold" – its maximum supply of only 21 million BTC has made it a reliable alternative in a context of weakening USD confidence.
The price increase of gold and Bitcoin reflects the market's loss of trust in the credibility of government-issued fiat money. This is also a clear signal showing that the cryptocurrency market is gradually maturing. If the independence of the US Federal Reserve continues to be eroded, capital refuge flows will likely continue to move towards non-sovereign assets like Bitcoin and gold.
Additionally, in the current rare situation where US stocks, US government bonds, and the USD are simultaneously declining – the "three-pronged strike" phenomenon – the Fed may be forced to intervene earlier than expected by lowering interest rates or even restarting the quantitative easing (QE) program to stabilize the USD and bond market. From this perspective, this could be one of the most positive macroeconomic scenarios for the crypto asset market.
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