Powell's Farewell Countdown: How Will His Policy Legacy Impact the US Dollar and Bitcoin?

The performance of the U.S. labor market has far exceeded the pessimistic expectations at the beginning of the year. Although economists warned that job growth might slow down, the latest data shows remarkable resilience. However, this strong employment does not translate into inflationary pressure. As the Consumer Price Index (CPI) for January slowed to a year-over-year increase of 2.4%, below the expected 2.5%, market concerns about runaway prices are dissipating. The continued cooling of inflation, to some extent, provides the Federal Reserve with room to loosen monetary policy.

This “Goldilocks” macroeconomic scenario—moderate economic growth and subdued inflation—was the ideal soft landing for the Fed. But Powell faces not just pure economic questions, but a serious political game. Investigations by the U.S. Department of Justice and frequent public attacks by Trump make every decision Powell makes at the end of his term heavily colored by the need to defend the Fed’s independence. He neither wants to prematurely loosen policy under political pressure nor to overly hawkishly tighten and stifle the economy. Walking this fine line forms the core of his policy legacy.

“Wash Shock” and the Technical Break of the Dollar Index

As Powell’s departure date approaches, market expectations for the next Fed chair are being priced in early. One of the leading candidates—Kevin Warsh—known for his hawkish stance and preference for quantitative tightening, is associated with the “Wash Shock” anticipation. This expectation has directly caused long-term Treasury yields to soar and has led to fluctuations in the dollar index amid complex sentiment.

As of February 14, the dollar index showed a slight decline after the CPI data release, closing around 96.922. The dollar’s weakness is driven by traders re-pricing expectations of Fed rate cuts. Despite a strong labor market, the falling inflation has led investors to believe the Fed has room to cut rates more than twice this year. Powell’s decision to keep rates unchanged at the end of his term (current federal funds rate target range at 3.50%-3.75%) effectively leaves a relatively neutral starting point for his successor.

Powell’s stance of maintaining “independence” has temporarily provided subtle support for the dollar—affirming to global capital that the U.S. central bank has not become a subordinate to the Treasury. However, once a successor takes office after May, if the White House successfully installs dovish figures, the dollar’s medium- to long-term credibility could be diluted.

Bitcoin’s Macro Pricing: From Safe Haven to Liquidity Thermometer

On Gate’s trading charts, Bitcoin (BTC) reacts most sensitively to this macro shift. On February 14, driven by CPI positive data, Bitcoin briefly broke through the $69,000 mark, rising 4.29% in 24 hours.

Bitcoin currently exhibits a complex “dual pricing logic.” On one hand, when Powell faces judicial investigations and threats to Fed independence, Bitcoin’s narrative as “digital gold” is reinforced, generating a “trust premium” based on the impaired dollar credit. On the other hand, Bitcoin remains constrained by the reality of global dollar liquidity. If a successor like Warsh accelerates balance sheet reduction, even if Powell leaves a controlled inflation environment, liquidity drying up could still exert a “drain” effect on high-risk assets like Bitcoin.

On-chain data shows Bitcoin’s current price is in a “tug-of-war” zone. The realized price (the average price at which coins last moved) is near $55,000. This indicates that despite the rebound, many short-term holders are still at a loss. The economic model of miners also provides a bottom reference: mainstream mining rigs like the S21 series, with a break-even cost of about $0.08 per kWh, have a shutdown price around $69,000 to $74,000. This closely aligns with current market prices, suggesting that if prices stay below this range, a new round of hash rate cleansing could occur. For traders on Gate, the $52,000 to $58,000 range is considered the “Maginot Line” in miner economics—a key level to watch for whether the bull market is truly over.

Summary

Powell’s tenure marks the end of an era. His policy legacy is a fragile balance between inflation and employment, and a final stand for Fed independence. The future of the dollar depends on whether the new chair tightens under “Warshism” or returns to quantitative easing under political pressure. For Bitcoin, this signals the restart of a new macro trading cycle.

Investors trading on Gate should be aware that whether Powell stays or leaves entirely, the global liquidity faucet has reached a turning point. The February 14 rebound was a short-term respite brought by cooling inflation, but the real trend-changing opportunities may only emerge after May, once the Fed’s power struggle settles and balance sheet reduction paths become clear. During this phase, closely monitoring the battle between the $60,000 support and the $74,508 resistance using Gate’s multi-dimensional data tools will be key to capturing structural opportunities in 2026.