Is Bitcoin's historic opportunity coming when the Federal Reserve is hijacked by politics?

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

Interest Rate Cuts Are Not Simple

On the surface, a 25 basis point rate cut is a routine operation to deal with an economic slowdown. From the perspective of economics textbooks, interest rate cuts are usually regarded as a standard tool 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 aide and the leading candidate for Federal Reserve Chairman Kevin Hassett publicly "predicted" a 25 basis point rate cut.

This "accurate prediction" from the White House's inner circle has forced the market to question: Is 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 established since the Fed'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 compromise between policy and political pressure. This collapse of trust is more terrifying than the interest rate cuts themselves. $40 Billion Bond Purchase: Implicit Money Printing? Besides the interest rate cut, the more controversial announcement was the Federal Reserve's plan to purchase $40 billion in short-term Treasury bills within 30 days. The official explanation is to maintain liquidity stability, technically different from the quantitative easing of 2008. However, the market is not buying it. Against the backdrop of a continuously expanding US fiscal deficit, investors tend to view any asset purchase as a prelude to implicit quantitative easing or fiscally driven monetary policy. Investors are choosing to believe in the worst-case scenario—political interference has led to implicit easing, and long-term uncertainty is increasing. The real risk lies in the Federal Reserve's independence, which is the cornerstone of financial stability and the dollar's global status. According to the Daily Economic News, financial experts have clearly pointed out that the Fed's loss of independence is the first domino to fall in the dollar's hegemony, equivalent to a nuclear bomb thrown at the dollar's credibility. How will the market price this risk? A recent Standard Chartered study 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 US interest rates. This is the market pricing in the risk of "fiscal dominance." 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 a higher term premium to hedge against a potential collapse in fiscal discipline. The logic is: Escalating political intervention → Market expectations that the Fed will be forced to cooperate with fiscal expansion → Increased term premium to hedge against inflation risk → Push up long-term Treasury yields. Once credibility is lost, regaining market trust is extremely difficult. Even more alarming is that although the dollar's credit foundation has been damaged in the long term, it is still supported in the short term by external geopolitical uncertainties. This short-term safe-haven support masks the long-term, structural weaknesses of the dollar caused by the damaged independence of the Federal Reserve. The impact on the crypto market is complex, given the combined macroeconomic environment of "easing monetary policy + risk premium": the bond market is experiencing a divergence between short-term and long-term trends, stock market volatility is rising, gold, while supported by two factors, still faces opportunity costs, and the dollar faces a contradiction between short-term safe-haven demand and long-term depreciation. For crypto participants, this crisis of Federal Reserve independence presents a crucial moment to re-evaluate the value of crypto asset allocation. Bitcoin: "Digital Gold" Amidst Shaking Dollar Credibility When the independence of the Federal Reserve is questioned and the foundation of the dollar's credibility is shaken, Bitcoin's core value proposition is strengthened like never before. Scarcity Counters Excessive Money Supply: The total supply of Bitcoin is fixed at 21 million, a fact written into the code that no one can change. In stark contrast, the Federal Reserve may 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's price from $3,800 to $69,000, a more than 17-fold increase. This was no accident; the market was voting for "hard currency" with real money. While this latest round of purchases is only $40 billion in Treasury bonds, far smaller than the 2020 "flooding," concerns about "fiscal dominance" have begun to fester. If the Federal Reserve is politically hijacked, the future could see not just $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 is the politicization of monetary policy. Bitcoin's decentralized nature makes it naturally immune to intervention 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 When the foundation of trust in the traditional financial system is challenged, decentralized finance (DeFi) provides an alternative that does not rely on the credit of a single sovereign power. The damage to the Federal Reserve's independence is essentially a collapse of "trust"—the market no longer believes that central banks can make professional decisions independently of political pressure. In this context, a trustless financial system 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, when you worry that central banks will over-issue currency due to fiscal pressure, DeFi provides an exit option. It's important to note that mainstream stablecoins (USDT, USDC) are still pegged to the US dollar and are subject to the transmission of dollar credit risk. If the US dollar depreciates in the long term, the purchasing power of these stablecoins will also decline accordingly. However, this also creates 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 development opportunities against the backdrop of questionable dollar credibility. 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 independence of the Federal Reserve 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 of Federal Reserve independence may become 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 Fed decision was not a simple rate cut, but a product of a compromise between monetary policy expertise and political demands. The real test will come when the economy overheats. If inflation rises in the future, and the Fed is forced to postpone 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. For crypto investors, don't be misled by the short-term benefits of rate cuts. When the trust foundation of the traditional financial system is challenged, the role of crypto assets is undergoing a fundamental transformation—from a "speculative tool" to a "structural choice for hedging sovereign credit risk." History often takes unexpected turns. When people begin to question the independence of central banks, and when the foundation of the dollar's credibility begins to crumble, decentralized monetary systems cease to be a "utopia" and become an increasingly realistic option.