Bitcoin Fluctuates Below $85K Amid Rising Stagflation Fears and Fed-Tariff Tensions

Bitcoin (BTC) remained steady just below the $85,000 mark on Thursday, as U.S. President Donald Trump’s continued pressure on Federal Reserve Chair Jerome Powell added a layer of volatility to the market amid growing stagflation concerns.

Markets took a hit on Wednesday following hawkish comments from Powell, who criticized Trump’s ongoing tariff strategy, warning that it could trigger stagflation—an economic scenario characterized by rising prices and stagnant growth. Powell emphasized that controlling inflation was his primary focus, hinting that the Fed may adopt a more aggressive monetary policy stance than previously anticipated.

This escalating tension between Trump and Powell, who was appointed by the former president, has been a point of contention since Trump’s return to the White House. Powell, whose term is secure until 2026, has insisted on completing his tenure, asserting that Trump lacks the authority to dismiss him.

On Thursday, The Wall Street Journal reported that Trump has been privately considering the removal of Powell for months, with former Federal Reserve Governor Kevin Warsh reportedly seen as a possible replacement. However, Warsh has cautioned against such a move, with Treasury Secretary Scott Bessent echoing the concern that firing Powell could destabilize the markets due to the Fed’s supposed political independence.

As of Thursday, the likelihood of Trump removing Powell this year rose to 19% on the blockchain-based prediction market Polymarket, marking the highest level since the contract’s inception in January.

The economic uncertainty intensified following the European Central Bank’s (ECB) decision to cut key interest rates for the seventh consecutive time, signaling ongoing concerns over deteriorating economic conditions in Europe.

Adding to the market stress, the latest Philadelphia Fed manufacturing index revealed a sharp decline in U.S. manufacturing activity, which dropped to its lowest level in two years. Meanwhile, the prices paid index reached its highest point since July 2022, further stoking fears that the combination of Trump’s tariffs and rising inflation could lead to stagflation in the U.S. economy.

Both the S&P 500 and the Nasdaq closed largely flat on Thursday, reflecting investor caution amid the uncertain economic environment.

Bitcoin Traders Navigate Volatility with Mixed Strategies Amid Market Jitters

In the cryptocurrency markets, Bitcoin and Ethereum (ETH) posted modest gains of 0.8% over the past 24 hours, with many assets in the CoinDesk 20 Index also edging higher. Bitcoin Cash (BCH), NEAR, and AAVE saw some of the largest increases.

Bitcoin’s price has stabilized between $83,000 and $86,000, as traders actively position for both upside and downside moves in response to ongoing market volatility.

On Deribit, traders have shown strong demand for call options at the $90,000 to $100,000 strike prices, expiring in May and June. This suggests that there is optimism about a potential price rally, as traders seek to capitalize on further upward movement.

At the same time, a noticeable uptick in put options at the $80,000 strike price reflects traders’ concern over possible price drops. Purchasing put options serves as a hedge against potential declines, providing insurance against unfavorable price swings.

The two-way flow of options activity comes as the VIX, the market’s fear gauge, remains elevated, staying significantly above its 50-day average despite pulling back from its recent highs. The VIX’s elevated readings signal that market participants continue to anticipate heightened volatility and uncertainty in the broader economic landscape.