Bitcoin, Ether Rebound as Analysts Flag Growing Threat to Fed Independence

Major cryptocurrencies recovered from early losses on Wednesday, as market analysts warned of increasing political pressure on the U.S. Federal Reserve and a potential erosion of its independence.

The central bank held interest rates steady at 4.25%, as widely expected, but two Trump-appointed officials—Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman—dissented in favor of a rate cut, raising eyebrows across markets.

The policy decision and subsequent comments from Fed Chair Jerome Powell sparked volatility in digital asset markets. Bitcoin briefly dropped to $116,000 following Powell’s remarks, while ether (ETH), XRP, and solana (SOL) also declined, triggering liquidations in futures markets.

However, losses were short-lived. At last check, bitcoin (BTC) had climbed back above $118,400, while ether traded near $3,870 and XRP hovered around $0.00314, according to CoinDesk data. The CoinDesk 80 Index rose 0.8% over 24 hours to 915 points.

Powell emphasized that the central bank remains focused on inflation management, not political pressures around government borrowing or mortgage costs—both priorities of former President Donald Trump, who has repeatedly criticized Powell for keeping rates high.

“The dissents from Waller and Bowman highlight the growing concern about the Fed’s independence,” said Jimmy Yang, co-founder of Orbit Markets. “This dynamic strengthens the long-term bullish case for crypto, particularly bitcoin, which was born out of skepticism toward centralized monetary control.”

Yang added that with no immediate rate cuts expected, markets may remain rangebound in the near term, awaiting new macroeconomic data—most notably July’s Consumer Price Index (CPI) report.

“CPI could rise as tariffs begin to take effect in the coming months. While that may spark another short-term risk-off move, persistent inflation could reignite the inflation-hedge narrative around crypto, especially for BTC,” he noted.

Greg Magadini, director of derivatives at Amberdata, also flagged Fed independence as a key risk for traditional markets—and a potential tailwind for digital assets.

“Wednesday’s decision helped the Fed preserve its independence for now, but the risk remains. If Powell is dismissed or yields to pressure and cuts rates too early, we could see a strong rally in hard assets like bitcoin,” Magadini said.

He noted that bond markets are already pricing in long-term inflation. “Since Trump’s election campaign began, we’ve seen the yield curve steepen. The 10s30s spread has widened from 15 to 55 basis points, and the 2s10s from 5 to 45 basis points,” he said.

“These moves reflect rising inflation expectations and underscore the importance of maintaining a credible, independent central bank. If that’s lost, the case for crypto only grows stronger.”