Criminal Investigation Against Fed Chair Powell: Analysis of Impact on Bitcoin and Crypto Markets

Justice Department Initiates Investigation Against Powell

The U.S. Department of Justice has launched a criminal investigation against Jerome Powell, the Chairman of the Federal Reserve. Powell confirmed on Sunday that the Fed had received so-called "subpoenas" on Friday – written summonses to produce documents under threat of penalty. The central bank was also threatened with indictment ^[3].

The official basis for the investigation is a statement Powell made before the Senate Banking Committee in June 2025. The allegation: Powell allegedly misled Congress in connection with the multi-year renovation of the Fed headquarters in Washington ^[1][3]. The renovation work, which began in 2022 and is scheduled for completion in 2027, is estimated to exceed the budget by approximately $700 million, with total costs of $2.5 billion ^[3].

Powell Sees Political Pressure on Central Bank Independence

In a video message, Powell dismissed the allegations as pretexts and directly linked the investigation to the ongoing conflict with President Donald Trump. "This investigation is a consequence of the Federal Reserve setting interest rates based on our best assessment of what serves the public, rather than following the President's preferences," Powell stated ^[1][2].

Trump had repeatedly verbally attacked Powell and criticized that interest rate cuts were not happening quickly enough. In November, the Republican called the U.S. benchmark interest rate "much too high" and added: "I'll be honest, I'd like to fire him" ^[2]. In December 2025, Trump announced he wanted to sue Powell "for incompetence" ^[3]. Trump himself denied to NBC News having knowledge of the investigation, but commented: "I don't know anything about it, but he's certainly not very good at the Fed, and he's not very good at building buildings either" ^[3].

Political Reactions and Market Movements

The investigation drew criticism even from Republicans. Republican Senator Thom Tillis stated he would not confirm any Trump-nominated candidate for the Federal Reserve until the legal matter is resolved ^[3]. Democratic Senator Elizabeth Warren accused Trump of abusing "the Justice Department's authorities like a wannabe dictator" ^[3].

Capital markets showed clear reactions: The S&P 500 declined temporarily, while gold and silver rose to new highs. The U.S. dollar depreciated slightly against other currencies ^[3].

Bitcoin as Non-State Asset in Focus

Bitcoin recorded an increase of 0.85 percent over the past 24 hours ^[1]. Analysts from crypto exchange Bitunix see long-term opportunities for the cryptocurrency in this development: "When confidence in the credibility of the dollar and the independence of the central bank is called into question, decentralized assets tend to receive narrative risk premiums," they told Cointelegraph ^[1][2]. Should political influence on monetary policy become structural, Bitcoin's role as a "non-state risk asset" would likely be further strengthened ^[1].

Well-known Bitcoin analyst Will Clemente commented: "This environment is literally exactly what Bitcoin was created for" ^[1][2]. Privacy coins like Monero recorded even stronger gains with an increase of 18 percent, and Zcash with 6.5 percent ^[1].

Short-Term Uncertainty Among Institutional Investors

Despite improved sentiment indicators, the most successful traders remain cautious. According to data from crypto intelligence platform Nansen, so-called "Smart Money" traders were net short on Bitcoin with a cumulative volume of $127 million, with an additional $1.6 million in short positions added in the past 24 hours ^[1]. At the same time, these traders were net long on Ether with $674 million and on XRP with $72 million ^[1].

According to prediction platform Polymarket, the probability of Powell leaving office prematurely before May 14 is only about 13 percent ^[2][3]. The most likely successor is considered to be Kevin Hassett, a Trump confidant with clear pro-crypto tendencies who holds between $1 and $5 million in Coinbase stock ^[2][3].