When the Federal Reserve is hijacked by politics, is the next Bitcoin bull market coming?

The Federal Reserve has cut interest rates, but the market is in panic.

On December 10, 2025, the Federal Reserve announced a 25 bps rate cut and plans to purchase $40 billion worth of short-term debt within 30 days. Traditionally, this is a major positive signal, but the market’s reaction was unexpected: short-term interest rates fell, while long-term Treasury yields rose instead of falling.

Behind this abnormal phenomenon lies a more dangerous signal: investors are pricing in the structural risk of “loss of independence of the Federal Reserve.” For crypto investors, this is a critical moment to reassess asset allocation.

Rate Cut Is Not Simple

On the surface, a 25 bps rate cut is a routine response to economic slowdown. From an economics textbook perspective, rate cuts are usually seen as standard tools to stimulate the economy, reduce corporate financing costs, and boost market confidence.

But the timing is too “coincidental.”

Before the decision was announced, Trump’s economic advisor and a top contender for Federal Reserve Chair, Kevin Hassett, publicly “predicted” a 25 bps rate cut. This kind of “precise prediction” from the White House core circle makes the market suspicious: Is this truly an independent decision by the Fed based on economic data, or just an early “heads-up”?

More critically, Trump has publicly attacked Powell multiple times over the past year, accusing him of “playing politics,” and even threatening to seek his removal. This unprecedented political pressure has broken the bottom line since the Fed’s inception. Historically, even during severe economic crises, few presidents have openly interfered with central bank decisions like this.

The market no longer views rate cuts as purely professional decisions but as outcomes of policy and political pressure compromises.

This collapse of trust is more frightening than the rate cut itself.

$40 Billion Bond Purchase, Hidden Money Printing?

Besides the rate cut, the more controversial move is the Fed’s announcement to buy $40 billion of short-term Treasury securities within 30 days.

The official explanation is to maintain liquidity stability, technically different from quantitative easing in 2008. But the market is not convinced.

Against the backdrop of a persistent US fiscal deficit, investors tend to interpret any asset purchase as implicit quantitative easing or a prelude to fiscal dominance.

Investors are choosing to believe the worst—political intervention has led to implicit easing, and long-term uncertainty is increasing.

True Risks

The independence of the Federal Reserve is the cornerstone of financial stability and the US dollar’s global position. According to the Daily Economic News, financial experts explicitly state that the loss of Fed independence is the “first domino” to topple the ‘Dollar Hegemony,’ equivalent to a nuclear strike on dollar credibility.

How does the market price this risk?

Standard Chartered’s latest research shows that although the money market expects short-term rates to decline, concerns over the Fed’s independence and fiscal policy are pushing up long-term US interest rates. This is the market’s early pricing of “fiscal dominance” risk.

The rise in long-term rates is not a response to short-term liquidity scarcity but reflects investors demanding higher term premiums to hedge against potential future fiscal discipline breakdowns. The logic is: political intervention escalates → market expects the Fed to be forced to cooperate with fiscal expansion → term premiums increase to hedge inflation risks → long-term Treasury yields are pushed higher.

Once credibility is lost, regaining market trust is extremely difficult. More worrisome is that, despite the long-term damage to dollar credibility, short-term support still comes from external geopolitical uncertainties.

This short-term safe-haven support masks the long-term, structural weaknesses caused by the loss of Fed independence on the dollar.

Impact on Crypto Markets

In the macro environment of “loose monetary policy + risk premium,” traditional assets face complex situations: bond markets show divergence between short and long term, stock market volatility rises, gold is supported by dual factors but still has opportunity costs, and the dollar faces a contradiction between short-term safe-haven demand and long-term depreciation.

For crypto participants, this crisis of Fed independence is a key moment to reevaluate the value of crypto asset allocation.

Bitcoin: “Digital Gold” Amid Dollar Credibility Shake

When the independence of the Fed is questioned and the dollar’s credibility is shaken, Bitcoin’s core value proposition is strengthened like never before.

Scarcity versus currency oversupply: Bitcoin’s total supply is fixed at 21 million, encoded into its code, and cannot be changed by anyone. In stark contrast, the Fed may succumb to political pressure and unlimitedly expand the money supply.

Historical data clearly confirms this. Whenever the Fed has expanded its balance sheet massively, Bitcoin tends to surge. The quantitative easing during the 2020 pandemic pushed Bitcoin from $3,800 to $69,000, a rise of over 17 times. This is not coincidence but a market vote with real money for “hard currency.”

Although this time only involves purchasing $40 billion of Treasury securities, much smaller than the “money printing” in 2020, market fears of “fiscal dominance” have already begun to ferment. If the Fed is hijacked by politics, future scale could be $400 billion, $4 trillion, or more. Such expectations are repricing Bitcoin’s anti-inflation value.

Decentralization Against Political Intervention: The essence of the Fed’s loss of independence is the politicization of monetary policy. Bitcoin’s decentralization makes it inherently immune to interference by any single government or institution.

No one can force the Bitcoin network to “cut rates” or “buy bonds,” and no president can threaten to remove the “Chairman” of Bitcoin. This censorship resistance demonstrates unique value amid a trust crisis in traditional finance. When people no longer believe central banks can resist political pressure, decentralized monetary systems become the last safe haven.

Ethereum and DeFi: Alternatives to Financial Infrastructure

When trust in traditional financial systems is challenged, decentralized finance (DeFi) offers an alternative that does not rely on sovereign credit.

The core issue of Fed independence erosion is a “trust” collapse—markets no longer believe that central banks can make professional decisions independently of political pressure. In this context, trustless financial systems become advantageous.

DeFi protocols on Ethereum execute automatically via smart contracts. Lending and borrowing rates are determined by algorithms and market supply and demand, not by a politically pressured committee. You deposit funds, and the contract executes automatically; you lend out funds, and rates are transparent and verifiable. The entire process requires no trust in banks or central banks, only trust in code.

This “rules as law” feature shows unique appeal during a financial trust crisis. When you’re worried about banks freezing your assets for political reasons or central banks overshooting due to fiscal pressure, DeFi provides an exit.

Note that mainstream stablecoins (USDT, USDC) are still pegged to the dollar and subject to dollar credit risk transmission. If the dollar depreciates long-term, the purchasing power of these stablecoins will decline accordingly.

However, this also creates new opportunities: decentralized stablecoins (like DAI) or stablecoins pegged to a basket of assets are exploring ways to detach from single sovereign credit. Although still early, in the context of dollar credit doubts, these projects may usher in new development opportunities.

Risks and Opportunities in Crypto Markets

It is important to emphasize that the crypto market itself is highly volatile and not suitable for all investors. A 10% daily fluctuation in Bitcoin can trigger panic in traditional markets, but is common in crypto.

In the current environment of challenged Fed independence and conflicting traditional safe-haven assets, crypto assets, as “non-correlated assets,” deserve a reassessment of their allocation value. Historically, Bitcoin has been viewed as a “risk asset,” moving in tandem with Tech Stocks. But as the trust foundation of traditional finance begins to shake, this correlation may fundamentally change.

More importantly, this crisis of Fed independence could be a watershed. In the past, Bitcoin was considered a “toy for speculators”; in the future, it may become a “hedge against sovereign credit risk.” This narrative shift will redefine the role of crypto assets in the global financial system.

Summary

This Fed decision is not just a simple rate cut but a product of compromise between monetary professionalism and political demands.

The real test will come during an overheated economy. If inflation rises in the future and the Fed is forced to delay rate hikes due to political pressure, independence will be completely lost. At that point, not only the dollar but the entire dollar hegemony system will face restructuring.

For crypto investors, do not be fooled by the short-term benefits of rate cuts. When the trust in traditional financial systems is challenged, the role of crypto assets is undergoing a fundamental transformation—from “speculative tools” to “structural options for hedging sovereign credit risk.”

History tends to shift unexpectedly. When people start questioning central bank independence and the dollar’s credibility begins to waver, decentralized monetary systems are no longer just “Utopian,” but an increasingly realistic option.

(The above content is authorized excerpt and reprint from our partner PANews. Original link | Source: Biaohua Blockchain)

Disclaimer: This article is for market information only. All content and viewpoints are for reference only and do not constitute investment advice. They do not represent the objective views or positions of Block. Investors should make their own decisions and transactions. The author and Block are not responsible for any direct or indirect losses resulting from investor transactions._