Is the next bull market for Bitcoin coming when the Federal Reserve is hijacked by politics?

The Federal Reserve cut interest rates, but the market is panicking.

On December 10, 2025, the Federal Reserve announced a 25 basis point interest rate cut and a $40 billion Treasury bill purchase plan within 30 days. Logically, this would be a major positive development, but the market reaction was unexpected: while short-term interest rates fell, long-term Treasury yields rose instead.

Behind this anomaly lies a more dangerous signal: investors are pricing in the structural risk of a "loss of Federal Reserve independence." For crypto investors, this is a crucial moment to re-evaluate asset allocation.

Cutting interest rates is not simple.

On the surface, a 25 basis point interest rate cut is a routine operation to deal with an economic slowdown. From the perspective of economics textbooks, interest rate cuts are usually seen as a standard tool to stimulate the economy, reduce corporate financing costs, and boost market confidence.

But the timing was too "coincidental".

Before the decision was announced, Kevin Hassett, Trump's economic aide and a leading candidate for Federal Reserve Chair, publicly "predicted" a 25-basis-point rate cut. This "accurate prediction" from within the White House's inner circle has led the market to question: was this truly an independent decision by the Federal Reserve based on economic data, or the result of prior "advance notice"?

More importantly, Trump has repeatedly attacked Powell publicly over the past year, accusing him of "playing politics" and even threatening to remove him from office. This unprecedented political pressure has crossed the line since the Federal Reserve's inception. Historically, even during the worst of economic crises, few presidents have so blatantly interfered in central bank decisions.

The market no longer views interest rate cuts as purely professional decisions, but rather as a product of compromise between policy and political pressure.

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

Is the purchase of 40 billion yuan in bonds a form of implicit money printing?

In addition to the interest rate cut, the more controversial move was the Federal Reserve's announcement that it would purchase $40 billion in short-term Treasury bills within 30 days.

The official explanation is to maintain liquidity stability, which is technically different from the quantitative easing of 2008. But the market is not buying it.

Against the backdrop of a continuously expanding US fiscal deficit, investors tend to view any asset purchases as a prelude to implicit quantitative easing or fiscal dominance.

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

Real Risk

The independence of the Federal Reserve is the cornerstone of financial stability and the global status of the US dollar. According to the Daily Economic News, financial experts have clearly pointed out that the loss of the Fed's independence is the first domino to fall, equivalent to a nuclear bomb being dropped on the dollar's credibility.

How does the market price this risk?

A recent study by Standard Chartered Bank shows that while the money market anticipates a decline in short-term interest rates, concerns about the Federal Reserve's independence and fiscal policy are pushing up long-term U.S. interest rates. This reflects the market's anticipation of the risks associated with a "fiscal-led" monetary policy.

The rise in long-term interest rates is not a reaction to a shortage of short-term liquidity, but rather a demand from investors for higher term premiums to hedge against a potential collapse in fiscal discipline. The logic is: escalating political intervention → market expectations that the Federal Reserve will be forced to cooperate with fiscal expansion → increased term premiums to hedge against inflation risks → pushing up long-term Treasury yields.

Once public trust is lost, it is extremely difficult to regain it. Even more alarming is that, despite the long-term damage to the dollar's credit foundation, it remains supported in the short term by external geopolitical uncertainties.

This short-term safe-haven support masks the long-term, structural weaknesses in the dollar caused by the loss of the Federal Reserve's independence.

Impact of the crypto market

Given the complex macroeconomic environment of "loose monetary policy + risk premium", traditional assets face a complicated situation: the bond market is diverging between short-term and long-term trends, stock market volatility is rising, gold is supported by two factors but opportunity costs still exist, and the US dollar faces the contradiction between short-term safe-haven demand and long-term depreciation.

For crypto participants, this crisis over the independence of the Federal Reserve is precisely a crucial moment to re-examine the value of crypto asset allocation.

Bitcoin: "Digital Gold" Amidst Shaking Dollar Credibility

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

Scarcity counteracts excessive money supply: Bitcoin's total supply is fixed at 21 million, a fact written into the code that no one can change. In stark contrast, the Federal Reserve might succumb to political pressure and expand the money supply without limit.

Historical data clearly confirms this. Whenever the Federal Reserve expands its balance sheet on a large scale, Bitcoin tends to experience a strong surge. The quantitative easing during the 2020 pandemic propelled Bitcoin from $3,800 to $69,000, an increase of over 17 times. This is not accidental; it's the market voting for "hard currency" with real money.

Although this purchase only involves $40 billion in Treasury bonds, a much smaller scale than the massive quantitative easing in 2020, market concerns about "fiscal dominance" have already begun to take hold. If the Federal Reserve is politically hijacked, the future purchases could not be $40 billion, but $400 billion or even $4 trillion. This expectation is repricing Bitcoin's value as an inflation hedge.

Decentralization counters political interference: The essence of the Federal Reserve's loss of independence lies in the politicization of monetary policy. Bitcoin's decentralized nature makes it naturally immune to interference from any single government or institution.

No one can force the Bitcoin network to "lower interest rates" or "buy bonds," and no president can threaten to remove Bitcoin's "chairman." This resistance to censorship demonstrates unique value in the face of a crisis of trust in the traditional financial system. When people no longer believe that central banks can withstand political pressure, decentralized monetary systems become the last safe haven.

Ethereum and DeFi: Alternatives to Financial Infrastructure

Decentralized finance (DeFi) offers an alternative that does not rely on the credit of a single sovereign entity when the foundation of trust in the traditional financial system is challenged.

The erosion of the Federal Reserve's independence is essentially a collapse of "trust"—the market no longer believes that the central bank can make professional decisions independently of political pressure. In this context, a financial system that does not require trust becomes an advantage.

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

This "code is law" characteristic shows unique appeal during financial trust crises. When you worry that banks will freeze your assets for political reasons, or that central banks will over-issue currency due to fiscal pressure, DeFi offers an exit option.

It's important to note that mainstream stablecoins (USDT, USDC) are still pegged to the US dollar and are therefore susceptible to the transmission of dollar credit risk. If the dollar depreciates in the long term, the purchasing power of these stablecoins will also decline accordingly.

But this has also created new opportunities: decentralized stablecoins (DAI), or stablecoins pegged to a basket of assets, are exploring paths away from the credit of a single sovereign power. While these projects are still in their early stages, they may see new growth opportunities against the backdrop of questionable trust in the US dollar.

The crypto market presents both risks and opportunities.

It is important to emphasize that the crypto market is inherently highly volatile and not suitable for all investors. A 10% daily fluctuation in Bitcoin would be enough to cause panic in traditional financial markets, but it is commonplace in the crypto world.

In the current environment where the Federal Reserve's independence is being challenged and traditional safe-haven assets face contradictions, the allocation value of crypto assets, as "uncorrelated assets," deserves a re-evaluation. In the past, Bitcoin was often considered a "risky asset," rising and falling in tandem with tech stocks. However, when the foundation of trust in the traditional financial system begins to crumble, this correlation may fundamentally change.

More importantly, this crisis regarding the independence of the Federal Reserve could be a watershed moment. In the past, Bitcoin was a "speculator's toy"; in the future, it may become a "tool for hedging sovereign credit risk." This shift in narrative will redefine the status of crypto assets in the global financial system.

summary

This Federal Reserve decision was not a simple interest rate cut, but rather a product of a compromise between the professionalism of monetary policy and political demands.

The real test will come when the economy overheats. If inflation rises in the future, and the Federal Reserve is forced to postpone interest rate hikes due to political pressure, its independence will be completely lost. At that time, not only the dollar, but the entire dollar hegemony system will face restructuring.

Crypto investors should not be misled by the short-term benefits of interest rate cuts. As the foundation of trust in the traditional financial system is challenged, the role of crypto assets is undergoing a fundamental transformation—from a "speculative instrument" to a "structural option for hedging sovereign credit risk."

History often takes unexpected turns. When people begin to question the independence of central banks, and when the credibility of the US dollar begins to crumble, decentralized monetary systems are no longer a "utopia," but an increasingly realistic option.